Categories: Business NewsNews
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2023-12-02 8:19 AM

South Africa’s Economy Faces Challenges Despite Marginal Growth

  • Marginal Economic Growth: South Africa's economy is expected to experience minimal growth in the third quarter, standing at 0.1%, a decline from the previous quarter's 0.6%.
  • Challenges Impacting Sectors: Despite improvements in electricity supply, the economy faces hurdles due to operational issues at Transnet, financial constraints, weakened global demand, and setbacks in various industries like mining, manufacturing, and retail.
  • Gloomy Outlook for 2024: The forecast for the future remains bleak, with ongoing power crises, logistical constraints, interest rate hikes, and global economic weaknesses predicted to limit growth to 0.7% in 2023, down from 1.9% in 2022, while projecting a modest recovery averaging 1.3% annually from 2024 onwards.
By Miriam Matoma

Economists at Nedbank foresee marginal Q3 growth but project a bleak 2024 for South Africa’s economy. Despite improved electricity supply, operational issues at Transnet, stricter financial conditions, and global economic weaknesses hinder sectors.

South Africa’s GDP likely records a meager 0.1% growth in Q3, a drop from the 0.6% growth in Q2. Multiple sectors experienced declines in production, despite reduced load shedding.

The economy grappled with electricity supply enhancements but suffered from self-sufficiency costs, Transnet’s woes, financial constraints, and reduced global demand, impacting most industries negatively.

Sector analysis reveals declines across multiple industries, barring accommodation income, food services, passenger transport, and real credit extension. Conversely, mining, manufacturing, electricity, construction, wholesale, retail, and vehicle sales all faced setbacks.

Nedbank highlighted a loss of momentum in Q3, despite energy availability improvements. While power shortage intensity lessened by 18.8% from Q2, 5,942 GW of electricity was shed, with an additional 121 hours of load shedding, straining energy-reliant sectors.

Persistent energy and operational issues at Transnet escalated, causing substantial delays at ports. Thousands of containers were stuck, impacting trade significantly.

The outlook for 2024 appears bleak due to ongoing power crises, logistical constraints, and weakened global demand affecting production. Interest rate hikes strain household finances, limiting consumer confidence and demand.

Nedbank predicts a meager 0.1% growth in Q4, projecting a decline in real GDP growth to 0.7% in 2023 from 1.9% in 2022. However, a modest recovery averaging 1.3% growth annually is anticipated from 2024 onwards, contingent on various factors.

The future growth trajectory depends on increased private sector adoption of alternative energy, Eskom’s ability to reduce load shedding, and Transnet’s enhanced efficiencies.

Stats SA will release the latest GDP figures on Tuesday, 5 December, offering further insights into South Africa’s economic landscape.

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Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: Twitter: @MatomaMiriam