The South African economy contracted by 0.3% (real GDP) in the third quarter of 2024, Statistics South Africa (StatsSA) said yesterday.
The agriculture industry was the main drag on growth on the production side of the economy, with transport, trade and government services also contributing to the slowdown.
Agriculture recorded its second consecutive decline, falling by 28.8% in the third quarter. It was the largest negative contributor, pulling GDP growth down by 0.7 of a percentage point. Drought plagued the production of field crops such as maize, soya beans, wheat and sunflower.
This does not spell good news for consumers heading into the festive period as the year wraps up.
Neil Roets, the CEO of Debt Rescue, highlighted the serious impact of South Africa’s sluggish GDP in the third quarter on the average consumer, particularly in the context of persistently high unemployment.
While unemployment improved slightly, dropping to 32.1%, Roets said this marginal decline offers little relief for households, already grappling with the high cost of living and financial insecurity.
“For most average South Africans, the combination of slow economic growth and stubbornly high unemployment creates a perfect storm. When one in three people actively looking for work cannot find it, it leaves households with little to no income stability. Families are forced to stretch every rand, and for many, this means turning to credit just to cover basic needs like food, utilities, and transport. Many are even starting to cancel expenses such as various forms of insurance,” Roets said.
“The economy’s inability to grow beyond 0.5% quarter-on-quarter shows that we’re stuck in a cycle of low productivity and poor investment. For the average consumer, this means fewer opportunities to earn a stable income and constant anxiety over how to make ends meet,” he added.
“In a high-unemployment environment, over-indebted consumers find it nearly impossible to catch up on repayments. Missed payments lead to higher interest charges, and soon they’re trapped in a debt spiral with no clear way out,” Roets further said.
Households were cutting back on everything - food, other essentials and healthcare - just to survive.
“This shows how fragile the financial position of the average South African remains,” Roets said.
Lead economist at KPMG, Frank Blackmore, said that although electricity supply was stable during the third quarter, enabling many industries to continue operations, growth did not materialise.
“It was the variable sectors, most notably agriculture, that pulled growth into negative territory. This means that even if we see strong growth in the fourth quarter, we might struggle to achieve the 1.1% growth forecasted by the government for this year,” Blackmore said.
“Weaker growth also means there’s not much price pressure requiring interest rate increases, so inflation will benefit. We will likely continue to see further rate cuts into mid-2025, which will hopefully help achieve higher economic growth,” he further said.
Blackmore added that South Africa needs to accelerate reforms that would enable higher economic growth rates.
Blackmore added that South Africa needs to accelerate reforms that would enable higher economic growth rates.
“The country’s population is growing at around 1.5% annually. Hopefully, the changes we’ve seen - such as the lack of load shedding, reforms in Home Affairs, and some of the other policies of the Government of National Unity - will help push us beyond the one-percentage-point growth rate. Next year, interest rate reductions should support both businesses and consumers by leaving them with more money in their pockets instead of servicing debt, ultimately boosting the economy,” he added.
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