Nicola Mawson
South Africa’s gross domestic product (GDP) increased by an unsurprising yet welcome 0.4% in the second quarter of 2024, as it avoided a technical recession following no growth in the first quarter.
The first quarter’s figure has been revised from an initial print of negative 0.1% and followed a 0.3% increase in the fourth quarter of 2023.
North West University Business School economist, Professor Raymond Parsons, said the gain “could represent a turning point in South Africa’s business cycle, as our growth performance has clearly been too low for too long”.
Yet, Casey Sprake, investment analyst of fixed income at Anchor Capital, pointed out that the “economy is simply not growing at an adequate rate to sustainably boost long-term employment prospects for South Africans”.
The ideal rate, she said, was 3% and up a year.
Economists indicated that previous data published by Statistics SA, such as those on inflation, mining and manufacturing, and producer price inflation, had collectively led to a view that there would be economic growth in the second quarter, albeit tentative.
Seven out of 10 sectors recorded positive readings, with gains from areas such as finance; manufacturing; trade; and electricity, gas, and water supply industries on the production side, and household and government consumption on the demand side.
Sectors that negatively impacted the reading included transport, storage and communication, as well the agriculture, forestry and fishing industry.
Elna Moolman, head of SA macroeconomic research at Standard Bank South Africa, said yesterday that the expansion “exactly matched our forecast”, noting that growth was supported by sustained electricity supply and some improvements in rails and ports.
Moolman added there was an encouraging recovery in consumer spending, although a disappointing contraction in fixed investment, particularly by the private sector.
“Of course, since then we’ve had significant political developments with the formation of the Government of National Unity towards the end of the quarter and the appointment of the new Cabinet at the end of the quarter,” she said.
“Since then, economic prospects have generally improved, and we still expect to see, in due course, an expansion and recovery in fixed investment and an improvement in growth.”
Old Mutual Group chief economist, Johann Els, told Business Report that the positive surprise came from the construction sector, which gained 0.5% quarter-on-quarter.
“The negative numbers in the second quarter in terms of mining, transport and agriculture were largely as expected,” he said.
Els pointed out that household consumption expenditure improved quite a bit from a negative number in the first quarter, to largely as expected 1.4% quarter-on-quarter gain, aided by car sales.
He added that fixed investment’s negative print was mostly because of a lack of investment in machinery, which is a correction from last year’s strong spending in alternative energy sources and is expected to normalise.
Els’s forecast remains unchanged at 1.3% growth for 2024, which is almost double the 0.7% recording in 2023. “For 2025, I still expect 2.2% growth. Lower inflation, lower interest rates, and improved confidence will all help in terms of getting towards that 2.2% growth for 2025.”
Thanda Sithole, FNB senior economist, said the outcome did not alter its headline growth projections.
“We maintain our forecast of 1.0% real GDP growth for this year, with an expected increase to 1.8% in 2025 and 1.9% in 2026,” he said.
Sithole explained that these projections were supported by easing energy constraints, moderating inflation, an anticipated shift towards easier but still restrictive monetary policy, the introduction of the two-pot retirement system, as well as a stable global growth environment.
BUSINESS REPORT