By Ntando Thukwana.
South Africa’s economy expanded at the slowest pace in four years in 2024 as most sectors failed to contribute to growth because of logistical constraints, weak consumer spending, a drought and poor fixed investment.
Gross domestic product expanded 0.6%, compared to 0.7% in 2023, Statistics South Africa said in a report released in the capital, Pretoria, on Tuesday. That was its worst performance since the height of the coronavirus pandemic in 2020 when lockdown restrictions to curb the disease’s spread ravaged output and disrupted trade.
The rand traded 0.2% stronger at 18.5734 at 12:36 p.m. local time.
Investors will watch Finance Minister Enoch Godongwana’s rescheduled 12 March budget for plans to further support growth. A previous spending plan was rejected by members of the governing coalition over a proposal to raise an additional R191 billion over the next three years by sharply increasing value-added tax.
Only three of 10 sectors contributed to growth last year, including finance, personal services and electricity, gas and water. They expanded 3.5%, 1.7% and 3.5%, respectively. Agriculture and trade were the biggest drags; they contracted 8% and 1.4%, respectively.
Gross fixed capital formation fell 3.7%, its worst performance since the pandemic.
The outcome for 2024 would have been even worse had growth not picked up in the fourth quarter. It expanded 0.6% in the three months through December, compared with a revised contraction of 0.1% in the prior quarter. Even so, it undershot the 0.8% median estimate of 10 economists polled in a Bloomberg survey.
The fourth quarter was lifted by agriculture and finance, which expanded 17.2% and 1.1%, respectively. Household consumption expenditure, which accounts for about two-thirds of GDP, grew 1% in the period.
Consumer spending received a boost from benign inflation, two 25 basis-point interest-rate cuts in the second half of last year, and the introduction of a so-called two-pot pension system that allows savers early access to part of their retirement funds without penalties.
“We saw that toward the end of 2024, two pot funds contributed to household expenditure,” said Bokang Vumbukani-Lepolesa, chief director for national accounts at Stats SA. “We also are mindful that interest rates were low round about the same period, which then contributed to households spending more.”
That momentum is expected to carry into 2025 after another quarter-point interest rate cut in January.
A separate Bloomberg survey foresees the economy expanding 1.7% this year. Still, such an outcome is too tepid to dent one of the world’s highest unemployment and poverty rates and much less than the 3% growth rate targeted by the governing coalition formed by the African National Congress after it lost its outright majority in May elections.