SA’s economy returned to growth in the final quarter of 2024, driven primarily by resilient consumer spending and gains in the services sector, though declines in fixed investment and industrial production weighed.
According to the Reserve Bank’s quarterly report released on Thursday, GDP expanded by 0.6% in the fourth quarter of last year following a revised 0.1% contraction in the third quarter.
However, full-year growth eased to 0.6% in 2024 marginally down from 0.7% the year before.
Real GDP in 2024 was only 1.6% higher than its pre-pandemic level in 2019, the Bank noted in its presentation, with the services sector (tertiary) the only one to recover fully while the agriculture and mining (primary) and manufacturing and construction (secondary) sectors remain below 2019 levels.
Household consumption rose by a brisk 1.0% in the fourth quarter, contributing the most to GDP growth, in line with the further increase in households’ real disposable income.
Spending growth was broad-based, covering durable, semi-durable and non-durable goods, though services spending dipped. Durable goods are long-lasting items such as appliances and cars; semi-durable goods include clothes and shoes; and non-durable goods are everyday items like food, fuel and toiletries.
On an annual basis, household consumption rose 1.0%, a step up from 0.7% in 2023.
Households also slightly improved their financial position. Household debt continued to rise in the fourth quarter of 2024, but more slowly than before, as people took on less new credit. Over the year, debt growth slowed from 7.1% in 2023 to 4.9% in 2024.
Debt-to-income ratio declined to 62.0%, from 62.4% in the third quarter and debt servicing costs eased to 8.9% of disposable income.
The share of income households spent on debt repayments dropped slightly to 8.9% in the fourth quarter, down from 9.1% in the third, thanks to slower debt growth and lower interest costs after the November rate cut.
Agriculture and mining rebounded in the fourth quarter.
Agriculture surged 17.2%, recovering from a 19.7% fall in the third quarter, led by field crops and livestock. Agricultural output shrank by 8.0% in 2024 as El Niño-related weather disruptions hit field crop production.
Mining dipped by 0.2%, dragged down by seven of 12 subsectors, with manganese ore, iron ore, gold and chromium ore contributing the most to the decline.
Output was hampered by lower international commodity prices as well as persistent rail and port inefficiencies.
Yet annual output ticked up 0.3% after two years of decline. Even with slight growth, mining output in 2024 remained 8.3% below its pre-pandemic level in 2019.
The construction and manufacturing sector contracted by 0.7%, with widespread declines.
Manufacturing fell, with six of the 10 manufacturing subsectors reporting low production volumes, attributed to low demand, rising input costs and logistical constraints.
The volume of both electricity produced and consumed decreased over this period, reflecting the decline in Eskom’s electricity generation capacity due to planned and unplanned outages.
Construction declined again, marking its eighth consecutive year of annual contraction, due to lower building activity.
Growth in the services sector was modest but steady. Commerce improved, with stronger wholesale, retail and vehicle sales — driven by better real incomes (related to the two-pot system) and interest rate relief.
Output from government services declined in the fourth quarter, alongside a loss of 29,000 jobs in community and social service — highlighting the strain on public service delivery.
Finance and business services expanded further, led by real estate and business services. However, transport and government services shrank, reflecting lower freight activity and fiscal constraints.
Investment deteriorated as the state pulled back. Fixed investment was the weakest signal in the data, contracting 0.7% in the fourth quarter, due to lower public sector and SOE spending. Only private investment increased, reflecting a slight rise in business confidence.
Measured by types of assets, investment in buildings, machinery and equipment declined, while spending increased on transport equipment, construction projects, and other assets like research, software and mineral exploration.
For 2024 overall, real capital outlays fell 3.7%, reducing the investment-to-GDP ratio to 14.5%, down from 14.9% the previous year.
The labour market improved, with 132,000 net jobs added in quarter four. Notable gains occurred in finance and business (179,000 jobs), manufacturing (15,000 jobs) and construction (12,000 jobs).
Additionally, employment in the informal sector and private households increased by 34,000 (1.0%) and 18,000 (1.6%), respectively, in the fourth quarter.
These increases were partly countered by job losses in the trade (41,000), transport and storage (30,000), community and social services (29,000), mining (13,000) and electricity (4,000) sectors.
Job losses were also recorded in agriculture, with 11,000 fewer persons employed.
The official unemployment rate dipped slightly to 31.9%, but long-term unemployment worsened, rising to 77.7% of the total jobless population. This is, however, still below the most recent peak of 80% recorded in 2021’s fourth quarter.
SA’s trade surplus widened to R233 bn in the fourth quarter, from R200bn in the third quarter, led by a 41.2% surge in gold exports as prices and volumes rose. However, overall mining exports declined for a second consecutive quarter.
Imports also increased, particularly in agriculture, vehicles and transport equipment, which included several aircraft, as well as textiles and articles thereof.
Despite a wider income deficit, the stronger trade position narrowed the current account deficit to 0.4% of GDP in the fourth from 0.8% previously.
The financial account showed a net outflow of R9.5bn in the fourth quarter, reversing the inflow seen in the previous quarter.
This was mainly due to foreign investors pulling out of local assets and SA investors increasing their investments abroad.
At the same time, direct investment into SA rose, driven by foreign companies putting more money into their local subsidiaries, local firms selling off stakes in offshore subsidiaries and foreign branches repaying loans to their SA parent companies.
The non-financial public sector borrowing requirement fell by R51bn in April—December 2024, thanks to better tax revenue and Eskom’s debt relief.
But the longer-term debt picture remains challenging. Gross loan debt rose 10% year on year to R5,668bn, or 77.3% of GDP, by December 2024.
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