South Africa’s GDP contracted by 0.3% in the third quarter of 2024, according to data published by Statistics South Africa on Tuesday, 3 December 2024.
Story Summary
- South Africa’s GDP fell by 0.3% in Q3 2024, driven by declines in mining, manufacturing, and trade sectors.
- Structural challenges such as unreliable electricity supply and reduced consumer spending contributed to the contraction.
- The Reserve Bank cut the repo rate to 7.75% in November, citing inflation moderation and weak demand pressures.
South Africa’s economic performance takes a hit in Q3
This marks a reversal after two consecutive quarters of growth, raising concerns about the economy’s resilience.
The decline was led by a 4.2% contraction in the mining sector, attributed to lower global commodity prices and operational inefficiencies.
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Manufacturing also dropped by 2.1%, while the trade, catering, and accommodation industry shrank by 2.4%, reflecting reduced consumer spending.
Growth in finance and personal services, at 1.6% and 0.7% respectively, partially offset these declines.
Year-to-date, the economy has grown at an annualised rate of 0.8%.
Implications of the GDP contraction
The contraction in GDP signals a continuation of challenges that have plagued South Africa’s economy for several years.
Key drivers of the decline, such as the 4.2% contraction in the mining sector, point to global and domestic factors at play.
Lower commodity prices have reduced export earnings, while logistical bottlenecks and disruptions in production further weighed on output.
The 2.1% decrease in manufacturing reflects weak business activity, with market instability and higher input costs putting pressure on industrial operations.
The 2.4% drop in the trade and accommodation sectors suggests reduced consumer confidence amid persistently high interest rates earlier in the year, leaving households with less disposable income.
Despite some growth in finance and personal services, these sectors were not robust enough to counterbalance the decline in other key industries.
The contraction also raises concerns about South Africa’s unemployment crisis, with shrinking sectors likely to impact job retention and creation.
The economic outlook remains fragile, with limited momentum to support a recovery in the short term.
Monetary policy adjustments amid economic uncertainty
Ahead of the GDP data release, the Reserve Bank’s Monetary Policy Committee (MPC) cut the repo rate by 25 basis points to 7.75% on 21 November 2024.
Reserve Bank Governor Lesetja Kganyago said the decision aimed to support the economy amid weaker global and domestic demand.
“The global economy remains under pressure, and weak demand from South Africa’s trading partners is expected to persist,” he stated.
Inflation, which remains within the target range of 3%–6%, had eased, allowing policymakers room to lower rates.
The rate cut was announced before the release of the third-quarter GDP figures.
