South Africa’s Economic Growth Hits Lowest Level Since Pandemic in 2024
In 2024, South Africa’s GDP growth reached only 0.6%, marking the slowest increase since the pandemic due to multiple factors such as weak consumer spending and a drought. Only three of ten sectors improved, while agriculture and trade experienced significant declines. A slight recovery in the fourth quarter signals potential growth, with expectations set for a 1.7% increase in 2025, though challenges like high unemployment and poverty persist.
In 2024, South Africa’s economy expanded at the slowest rate since the pandemic, with a growth rate of only 0.6%. The inadequate growth was attributed to several factors including logistical issues, weak consumer spending, a significant drought, and poor investment in fixed assets. This performance marked a decline from 0.7% in 2023 and the worst since the onset of COVID-19 lockdowns in 2020, which severely disrupted economic activities.
According to Statistics South Africa, only three out of ten sectors contributed positively to growth last year, specifically finance, personal services, and the utility sector, which includes electricity, gas, and water. These sectors grew by 3.5%, 1.7%, and 3.5%, respectively, with improvements in electricity generation attributed to the state utility, Eskom Holdings, which saw better performance in late 2024, following a history of frequent power cuts. Conversely, agriculture and trade faced the most significant contractions, decreasing by 8% and 1.4%, respectively.
The outlook for 2024 might have been worse if not for a slight rebound in economic activity in the fourth quarter, where GDP grew by 0.6%. This improvement was primarily propelled by a remarkable 17.2% increase in agriculture and a 1.1% rise in finance. Household consumption, which is a critical part of GDP, also recorded a modest 1% increase, bolstered by favorable inflation rates and interest rate cuts introduced in the second half of the year.
Economic analysts project that South Africa’s growth could accelerate in 2025, spurred by increased consumer demand, which is likely to drive higher investment and industrial activity. “South Africa’s growth will likely accelerate in 2025 — following its weaker-than-expected performance last year — led by consumption,” stated Yvonne Mhango, an Africa economist.
Despite the potential recovery, the anticipated growth rate of 1.7% still falls short of the 3% growth target set by the governing coalition and will not substantially alleviate the high unemployment and poverty levels prevalent in the country. Future economic policies from Finance Minister Enoch Godongwana increase focus on fostering growth and responding to the pressing economic challenges ahead.
In summary, South Africa’s economic growth in 2024 was disappointingly slow at 0.6%, the worst performance since the pandemic. The contraction in key sectors such as agriculture and trade significantly hindered progress, while some sectors achieved modest gains. Looking forward, predictions suggest a gradual recovery in 2025, driven by rising consumer demand and investment, but still needing initiatives to address the critical issues of unemployment and poverty.
Original Source: financialpost.com
