Transport, trade and government services also contributed to the slowdown, which saw GDP falling 0.3% in the third quarter and effectively undoing the 0.3% growth seen in the second quarter.
According to Stats SA, there was a decline in imports, exports and government consumption on the expenditure (demand) side. Exports declined by 3.7% – the largest decline in three years. Stats SA attributed the slump to weaker trade in (among other products) pearls, precious and semi-precious stones and precious metals; vehicles and transport equipment (excluding large aircraft).
Senior economist at FNB Thanda Sithole put it into perspective. “The agricultural sector’s ongoing weakness means that the economy has grown by just 0.4% year-on-year in the first three quarters of 2024. Achieving our consensus 1.0% growth projection for the year now appears increasingly unlikely,” he said.
Sithole said the “tepid growth, alongside subdued inflation projections” reinforces the case for a gradual reduction in interest rates to support the cyclical recovery, while structural reforms remain critical to unlocking higher and more sustainable growth over the medium to long term.
Agriculture leaves a dent in GDP growth
Agriculture was the largest negative contributor to economic growth as the sector decreased sharply by 28.8% quarter-on-quarter.
The drought was a major headwind, negatively impacting the production of field crops such as maize, soya beans, wheat and sunflower. Adverse weather conditions also hindered the production of subtropical fruits, deciduous fruits and vegetables in parts of the country. As my colleague Ed Stoddard has previously written, La Niña and the drenching rains it typically brings to southern Africa remain elusive and it increasingly looks like it may not emerge at all this summer.
Chief economist at Momentum Investments Sanisha Packirisamy said the large dip in agriculture was a concern. “Our estimate for economic growth in 2024 remains lacklustre at around 1%, with a potential for a downside surprise, before rebounding to an expected 1.8% in 2025,” she said, adding that improving sentiment, lower inflation, lower interest rates and growing momentum in structural reform underpin the expected boost next year. Global policy uncertainty in the United States remains a downside risk.
The South African Reserve Bank (SARB) has estimated that the South African economy could grow by 2% by 2027, but Momentum Investments is a little more optimistic, anticipating that economic growth will marginally breach the 2% mark in 2026.
GDP Growth Forecasts by Country, in 2023
An economic note from Anchor Capital points to the transport, storage and communication sector as the second-largest negative contributor, driven by declines in land transport and transport support services
“Similarly, the trade, catering and accommodation industry faced setbacks, weighed down by disappointing performances in wholesale trade, motor trade, and the restaurant, fast food and catering sectors,” Anchor Capital said.
Glimmers of hope
However, Casey Sprake, investment analyst, fixed income, at Anchor Capital says the figures were not all doom and gloom. “Despite the challenges, there were also bright spots … showcasing resilience in some sectors. The finance industry emerged as a significant positive contributor to GDP, buoyed by robust activity in banking, insurance, real estate and other business services. The electricity, gas and water supply sector expanded for a second consecutive quarter, supported by increased electricity generation and consumption. Mining also posted gains, driven by stronger manganese and chromium ore production,” she said.
Sprake pointed out that the construction sector recorded its second straight rise, growing by 1.1% – its largest increase in two years.
“This growth was primarily driven by construction works, supported by activities related to non-residential buildings. These pockets of resilience in the economy provide a glimmer of hope amidst the challenges,” she said
