There’s no make-up for this pig. Our economy is in ugly shape.
South Africa’s latest GDP data is a sobering reminder of what economic stagnation looks like when politics gets in the way of progress. The economy grew by just 0.1% in the first quarter of 2025 – better than the 0.1% contraction predicted by Bloomberg, but not by much.
It’s “not something to celebrate”, says Maarten Ackerman, chief economist and advisory partner at Citadel. He expects growth for 2025 to come in “well below 1%”, which is less than half the rate of population growth. South Africa, he says, is firmly in a per capita recession, meaning we’re all getting poorer by the day.
Only four of 10 sectors expanded in the quarter. Agriculture surged 15.8%, while transport rose 2.4% and finance and trade added modest gains, helped by retail, insurance, activity in the pension fund industry, auto sales, accommodation and food.
This is cold comfort. The government of national unity (GNU) should have been a break from the ANC’s track record of indecision, poor policy and political infighting. Instead, the budget descended into a guessing game over whether the DA would stay or go, or whether the ANC would be bad enough to hoof John Steenhuisen and Co out of the Union Buildings.
The GNU has yet to articulate a coherent strategy for growth and employment. Instead, President Cyril Ramaphosa gave President Donald Trump a target by signing the Expropriation Act, fanning fears based on mistruths of land grabs.
Gwede Mantashe, meanwhile, made sure to cling to his title as the world’s single biggest deterrent to mining investment with the release of the draft Mineral Resources Development Bill, just days before Ramaphosa’s trip to the White House.
Add to that an ideologically charged push for National Health Insurance (NHI), law firms fighting it out with the government over irrational and impossibly unworkable BEE codes, a vague R100bn transformation fund, and close ties with geopolitical outliers like Russia and Iran.
It’s no surprise that the private sector remains in wait-and-see mode.
Broken promises
The most worrying number in the GDP data was the 1.7% drop in gross fixed capital formation, led by a 4.5% contraction in private sector investment. Companies aren’t buying into the idea of a South African turnaround.
Despite Ramaphosa’s many reform pledges, very little has materialised. Promises to end bailouts and restructure state-owned enterprises remain just that.
Mining, once the backbone of the economy, contracted 4.1% in the quarter. Gold prices tested record highs, but South African output crumbled; for copper, coal and nickel too. The country has, once again, missed the commodities boat. Manufacturing shrank 2%, and construction by 3.8%.
FNB’s Thanda Sithole remains cautiously optimistic, forecasting 1.3% growth this year, supported by low inflation, 100 basis points of rate cuts since September, and signs of stabilisation in the GNU. Nedbank sees 1% growth in 2025, rising to an average of 1.5% over the next three years if structural constraints ease.
They’re banking on stronger consumer demand, helped by lower borrowing costs and pension withdrawals under the two-pot retirement system. If La Niña brings good weather and confidence improves, agriculture and retail sales could surprise to the upside. Still, the US president is a wild card, and geopolitical tensions are high.
But, are we really celebrating even 2% growth?! Also, colour us sceptical on the “structural reform” mantra.
South Africa lacks the political will to get out of the way. The private sector has the capital, capacity and urgency to rebuild energy, rail, ports and housing. What it lacks is a partner in government with the same resolve. Besides, the government has blown all the money.
The data is warning us that the economy will not recover while ideology trumps pragmatism. Drop the NHI fantasy. Give Mantashe a coal mine as a retirement package (and a rehabilitation programme to go with it). Jail a top crony or two for corruption. Show we’re serious about crime.
Political courage needs to be found in the government. Ramaphosa displayed a little bit of it in the Oval Office. The government must swiftly step aside and let the private sector lead the recovery.
Because if nothing changes, we’ll be back here next quarter, again hoping to avoid a contraction. And the quarter after that.
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