Following a contraction of 0,1% in the third quarter of 2024, the South African gross domestic product (GDP) expanded by 0,6% in the fourth quarter (October–December).
Growth was led by agriculture, finance and trade on the supply (production) side of the economy. Household spending led growth on the demand (expenditure) side.
Annually, the GDP grew by 0,6% in 2024 compared with 2023.
Agriculture, finance and trade record gains in the fourth quarter
Agriculture had the most significant positive impact on GDP growth on the supply side of the economy. Following a sharp decline in the third quarter, the industry rebounded by 17,2%, lifting GDP growth by 0,4 of a percentage point. This was mainly due to a rise in the production of field crops and animal products.
The finance, real estate & businesses services industry grew for an eighth consecutive quarter, with financial intermediation, real estate activities and other business services the largest positive contributors to growth.
The trade industry expanded on the back of increased retail, wholesale and motor trade sales. This reflected positively on the demand side of the economy, with household consumption spending rising in the fourth quarter.
Seven industries performed poorly, with manufacturing and transport, storage & communication the most significant negative contributors to growth. Manufacturing was mainly pulled lower by weaker production levels in the metals & machinery and automotive divisions. Transport, storage & communication recorded a fourth consecutive quarter of decline. The industry witnessed a pullback in land transport and transport support services.
Mining activity was down on weaker production levels for manganese ore, iron ore, gold, chromium ore, nickel and copper. Coal and platinum group metals were positive, but not enough to keep the industry above water.
Trade and mining turn to inventories to meet demand
The demand side of the economy – measured by expenditure on GDP – was mainly lifted by a rise in household consumption spending.
Households spent more on a range of products; most notably, clothing & footwear, food & non-alcoholic beverages, recreation & culture, and household goods. The data suggest that consumers might have more breathing space than they did a year ago. In real terms, households spent 2,3% more in the fourth quarter of 2024 compared with the fourth quarter of 2023. The trade industry increased its size by 1,6% over the same period.
The economy witnessed a R16,4 billion drawdown in inventories, in part due to the trade industry accelerating efforts to meet demand that exceeded supply. Mining also drew from its stockpiles to address a rise in export demand while production lagged, contributing to the overall drawdown in inventories.
Investment in infrastructure and other fixed assets (gross fixed capital formation) was weaker in the fourth quarter, mainly because of a decline in residential buildings, machinery & other equipment, and non-residential buildings.
2024 in review
The fourth quarter GDP release concludes the results for the calendar year. The South African economy was 0,6% larger in 2024 compared with 2023.
The finance industry was the notable bright spot, pushing GDP growth higher by 0,8 of a percentage point (Figure 4). Electricity, gas & water, personal services and mining also expanded in 2024. On the downside, agriculture and trade were the most significant drags on growth.
Frank Blackmore, lead economist at KPMG South Africa, offers this analysis of the GDP figures:
“The South African GDP figures came out this morning for 2024 at 0.6%, which is slightly under the recent tenure average of 0,7% and about half of what was expected at the beginning of 2024.
“If we take a sectoral view through the results, we can see that the agricultural sector declined by 8% – the second year in a row. It is a cyclical industry and is subject to not only the network industries, transport industries, the working of the ports, as well as safety and security issues, but also of course climate change, droughts, floods, etc and therefore the numbers can fluctuate quite a lot.
“What’s concerning is the construction industry – also contracted by 5% in 2024 compared to 2023 but that this was also the eighth contraction in a row. Since 2017, the construction sectors had a contraction; telling us that there’s not enough expenditure on infrastructure in South Africa and just looking around town, cities, roads, electricity, water infrastructure, etc.
“This is plainly clear to most, but also, there’s not enough demand from consumers in terms of economic activity for more housing, office and warehouse space etc, and therefore that sector remains under pressure.
Trade, catering and accommodation also shrunk zero at 1,4% – the second year in a row. That also tells you that consumers remained under pressure – if retail, wholesale, trade is within that category and contracting as is transport, storage and communication, where I think the sector that would have shown the contraction would be the transport sector.
“We know the dysfunctionality of rail, road and port systems, even though these are currently being addressed to a certain degree by government.
“In addition, manufacturing shrunk 0,5% even though last year we had a long period with uninterrupted power suppl and therefore, the expectation was for manufacturing sector to show growth, but that was under the premise that consumption in South Africa would create the demand for such manufacturing goods, which evidently was not the case, again, stressing the fact that the South African consumer is under pressure.
“Growth came too in the utility sector – so, electricity, gas, water, primarily through expenditure on electricity investments, I would assume, as well as real estate, finance and business services. So, banking also grew 3,5% as personal services, slight decline as well to governance services.
“So, that’s a production view but if we looked at it from the expenditure approach, we see that there was some increase, in fact, one percentage point increase in consumption expenditure, but still very low.
“There was 0,4% in government expenditure, but a large contraction of 3,7% in investment spending growth fixed capital formation and trade also declined. So, exports decreased by 2% while imports decreased by 6,3%.
“What does this all mean? It means that economic growth is not sufficient enough to help South Africa out of the current hole that it’s in, all focus should be placed on creating growth in the economy, not only for its increased revenues, as well as its poverty and employment, alleviating benefits, but also just to create a lot more economic opportunity within country.”