Government to Announce Improved GDP Numbers Today But Medium-Term Outlook Remains Sub-Par

South Africa’s latest economic growth figures are expected to show a modest improvement when Statistics South Africa releases fourth-quarter GDP data today. Economists anticipate that the economy expanded by between 1.2% and 1.4% in 2025, more than double the 0.5% growth recorded in 2024.

According to a note from advisory firm Frans Cronje Private Clients, “The improvement reflects a somewhat more supportive macroeconomic environment during the second half of last year. A stronger rand helped ease imported inflation pressures, while lower global oil prices during the third and fourth quarters reduced fuel costs and supported household purchasing power.”

“Monetary policy also provided some relief. The South African Reserve Bank cut interest rates by a cumulative 150 basis points from September 2024, gradually lowering borrowing costs for consumers and businesses. At the same time, stronger commodity and gold prices offered support to key export sectors, while widely feared tariff shocks failed to materialise.”

Together, these factors helped stabilise demand and lift economic activity off the very weak base recorded in 2024.

Despite the expected improvement, the firm cautioned that the medium-term outlook remains subdued.

The chief reason for this is that “weak business confidence continues to weigh on private sector investment, with fixed investment expected to remain below 15% of GDP”.

Emerging markets typically maintain investment rates upward of 25% of GDP.

Speaking to investors in Cape Town last week, Cronje said, “The investment rate remains South Africa’s foundational indicator. If I were allowed to see only one number on South Africa for the next 20 years, and from that have to describe what kind of country South Africa became, I would pick the investment rate.”

At a rate of around 15% of GDP, South Africa’s growth rate is likely to remain below 2% through 2026, 2027, and 2028.

Profound policy reforms, especially around black economic empowerment (BEE), property rights, energy, logistics, and foreign policy, would be needed to lift the investment rate above 20%. At that level of investment economic growth would likely exceed 3%, while at 25% the investment rate would drive the rate of economic growth to nearer 5%. At that rate of growth, South Africa’s unemployment number would fall from the current over 30% figure to nearer 10% over 20 years.

The reforms to enable that kind of drop would need to be on a scale beyond what the government is currently considering.

On BEE, the extent to which the policy taxes capital would need to be abandoned. On property rights, expropriation law would need to be redrafted to make clear that assets cannot be taken by the state for less than market-related compensation. On energy, South Africa’s defunct coal plants would need to be refitted at scale, while on logistics, private operators need to be given full management control of port and rail operations. Foreign policy would need to shift from ideological grandstanding to deal-making in order to strike significant new investment pacts with both Washington and Beijing.