South Africa’s GDP growth in 1Q25 was a modest 0.1% q/q and 0.8% y/y, with most sectors, particularly the productive ones
such as construction, mining, and manufacturing, recording contractions. While household consumption expenditure growth was
maintained, the demand side of the economy reflected ongoing declines in government consumption, exports, and total fixed
investment.
Of particular concern is the sharp 4.5% q/q decline in private sector fixed investment, which also contracted by 4.7% y/y (not
seasonally adjusted). Investment remains subdued as a share of GDP, reflecting a weaker investment climate amid persistent
macroeconomic and policy uncertainty. The benefits of the economic reforms implemented thus far are taking longer to materialise,
as evidenced by the continued weakness in fixed investment. Private sector fixed investment remains constrained at around 10.1%
of GDP, well below the 15.7% recorded at the end of 2008.
Export volumes also remained subdued, constrained by both a challenging external environment and persistent domestic logistical
bottlenecks. This is reflected in real net exports remaining in deficit since the beginning of 2011 (excluding the pandemic year
of 2020). Exports accounted for 27.8% of GDP in 2024, down from 30.1% in 2007, indicating subdued export-led growth. The
outlook for exports remains clouded by ongoing global tariff uncertainty. It will be critical for the Government of National Unity
(GNU), alongside exporting businesses, to strengthen trade relations with existing major partners while exploring new export
markets.
Considering the prevailing weakness in private sector investment and subdued business confidence, reflected in the latest BER
survey, we have revised our 2025 growth forecast down to 1.0%, from 1.3% previously. Nonetheless, we still expect growth to rise
towards 2.0% by 2027, supported by ongoing structural reforms and cyclical tailwinds, including easing inflation and interest rate
cuts, which should bolster household consumption.
Overall, our near-term forecasts balance weak investment trends with a gradual recovery in consumer spending. However, risks
remain tilted to the downside, particularly for fixed investment, given the still-fluid macroeconomic and policy environment.
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