A crash in the agricultural sector led SA’s economy to shrink 0.3% in the third quarter, shocking economists who had expected GDP to expand over the period and dashing hopes that full-year growth could reach 1% or more.
Growth excluding agriculture was roughly in line with market expectations at 0.4% for the quarter and 0.9% higher than a year ago, with mining and manufacturing experiencing mild growth since the suspension of load-shedding.
Still, the latest figures have cast doubt on assumptions that the economy could be at a turning point thanks to a surge in confidence and stronger reform momentum since the inauguration of the government of national unity (GNU).
While economists expect the fourth quarter will be boosted by lower interest rates and “two-pot”-driven consumer spending, the third-quarter disappointment has already prompted some to downgrade their full-year forecasts.
Tuesday’s data has also raised concerns about the accuracy of the agriculture numbers. Stats SA relies on the department of agriculture, land reform & rural development, which has yet to be separated even though it now falls under two ministers — land reform & rural development’s Mzwanele Nyhontso and agriculture’s John Steenhuisen.
Two quarters ago Stats SA made large revisions to the previous quarter’s data, reportedly because of errors in the department’s calculations, and some economists expect it may end up doing so again. Though agriculture had been widely expected to decline slightly on the impact of this year’s drought on the maize crop, the severity of the drop came as a surprise — agricultural production plummeted 29%, shaving 0.7 percentage points off overall GDP.
Bureau for Economic Research chief economist Lisette IJssel de Schepper said agriculture data had been highly volatile in recent quarters, with revisions to historic data further complicating the picture for a sector which is small (3% of GDP) but has played havoc with the overall GDP outcome.
“Experts in the field have expressed concern about the extent of the third-quarter contraction in agricultural production and warn that there could be [another] large revision to the print as other measures of activity in the sector are not nearly as bleak,” De Schepper said.
Agbiz economist Wandile Sihlobo said the sector had experienced a challenging year as a result of the El Niño-induced midsummer drought and lingering animal diseases. While the sector had been expected to underperform, the extent had surprised and the data required closer inspection, he said.
Not all was doom and gloom, with horticulture performing relatively well on better dam levels and more reliable electricity, Sihlobo said.
De Schepper said the economy would need to expand at 2.6% in the fourth quarter to record full-year growth of 1%, and that seemed unlikely. Excluding agriculture, the economy had essentially “churned along”, with growth slowing to 0.4% from 0.5% in the second quarter. “The underlying momentum of the economy hasn’t changed,” she said.
Minerals Council economist Hugo Pienaar said even assuming a solid rebound activity during the fourth quarter, full-year growth of 0.5% now seemed likely for 2024, down from 0.7% in 2023.
“We will need to wait for 2025 before the real benefits from the absence of load-shedding, increased confidence (assuming it is sustained), as well as lower inflation and interest rates start to kick in,” he said. “Much-needed further progress on lifting the tonnages transported by Transnet will also assist in driving faster mining and overall real GDP growth in future.”
Goldman Sachs has revised down its full-year GDP growth forecast to 0.6% from 1%, and to 1.6% from 1.8% for 2025 as a result of the latest GDP data, which economist Andrew Matheny said was “incrementally dovish for the monetary policy outlook (we forecast rate cuts at the next two meetings followed by a slower pace of cuts down to a 6.5% terminal rate in the first quarter of 2026).”
Stats SA’s data show the electricity, finance and business services, and mining and construction sectors all grew by more than 1% during the third quarter, with personal services and manufacturing also showing growth.
But government services, trade, transport and agriculture contracted.
On the upside, investment picked up slightly after four negative quarters, growing by 0.3%. Economists had been watching the investment trend closely to see if higher confidence after the formation of the GNU would filter through the economy, though this is expected to take time.
The main driver of the increase was the “other assets” category, which includes investment in areas such as computers and software.
Household consumption, which tends to be the mainstay of the economy, also grew by a muted 0.5%, down from 1.2% in the second quarter.
The standout was spending on “recreation and culture”, which rose 1.2% on what Stats SA officials said reflected a surge in gambling by consumers, particularly online sports betting.
Spending on restaurants and hotels (1.1%) and spending on food also reported growth. Transport spending by consumers was down though, with depressed conditions in the retail motor trade also affecting the performance of the trade sector.
Update: December 3 2024
This story has been updated with new information throughout.
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