The economic context of South Africa

Economic Indicators

South Africa has a highly developed economy and advanced economic infrastructure, making the country the leading African economy (with Nigeria) and home to around three-quarters of the largest African companies. South Africa's economy has faced challenges in recent years, with power shortages and disruptions to rail and port operations limiting growth to 0.7% in 2023. Growth remained subdued in 2024, estimated at 0.8% by the IMF, due to election-related uncertainty and severe droughts. However, power generation stabilized, and following the formation of a reform-oriented Government of National Unity in June, confidence among consumers, businesses, and investors rebounded. Real GDP growth is projected to rise to 1.5% in 2025, driven by recovering private consumption and investment, supported by stable electricity generation. Over the medium term, growth is expected to average 1.8%, with investment improving as reforms address electricity and logistics bottlenecks (IMF).

South Africa's public finances have deteriorated significantly over the past 15 years. Since the Global Financial Crisis (GFC), fiscal deficits have averaged over 4% of GDP, driven by rising wage costs, social transfers, and support for state-owned enterprises (SOEs). Despite some consolidation efforts before the pandemic, including tax increases and a spending rule, revenues fell short of expectations while public spending continued to rise, pushing public debt from 25% to 74% of GDP from FY08-23. The pandemic further strained public finances. Rising debt, tight financing conditions, and the loss of investment grade have increased interest payments to nearly 20% of revenues, limiting funds for other priority spending, including investment. In FY23, the deficit reached 5.9% of GDP, 2 percentage points higher than the previous year, due to lower tax revenues (mainly from corporate income taxes) and higher spending (especially on debt service and support for Eskom, the electricity SOE). As a result, the primary balance showed a deficit of 0.8% of GDP, down from a surplus of 0.7% in FY22 (data IMF). For 2025, the primary deficit should increase to 1% of GDP, before turning positive in 2026 (+0.3%). With general fiscal deficits expected to remain high in the medium term, public debt is projected to rise from 75.7% in 2024 to 80.1% by 2026 (IMF data). In 2024, banks maintained strong capitalization with a capital adequacy ratio (CAR) of 17.1% and liquidity with a liquidity coverage ratio (LCR) of 146.3%. Profitability remained stable, with a return on equity (ROE) ratio of 15.6%, despite non-performing loans (NPLs) reaching 5.2% of total loans, above pre-pandemic levels. NPLs are covered by standard IFRS provisions. Inflation slowed from 5.9% in 2023 to an average of 4.6% in the first eleven months of 2024, driven by lower fuel and food prices. For 2025, the IMF expects inflation to decrease to 4%.

Unemployment fell to 32.1% in Q3 2024, as employment growth picked up. However, youth unemployment remains high at 60.2%, and 8.1% of the working-age population is classified as discouraged from work (NEET – data IMF). The lack of job opportunities continues to drive high inequality in South Africa, although average nominal wages and salaries kept pace with inflation in Q3 2024. according to the latest data available from the World Bank, around 55.5% of the population lives below the national upper poverty line. The IMF estimated the average GDP per capita (PPP) at USD 16,009 in 2024.

Main Sectors of Industry

Agriculture represents a small part of South Africa's GDP (2.6%) and employs 19% of the workforce (World Bank). The country's agricultural economy is highly diversified and market-oriented. South Africa consistently ranks among the top wine-producing countries and is the continent's largest corn and sugar producer. Grains and cereals - such as maize, wheat, barley and soya beans - are the county's most important crops. As such, the country produces all major grains - with the exception of rice. The “2021-2030 Agricultural Outlook Projections Report” produced by The Bureau for Food and Agricultural Policy (BFAP) asserts that the country’s real agricultural GDP could grow by 14% by 2030, with gross production value increasing by almost USD 2 billion. According to the latest figures from Statistics SA, agricultural GDP declined by 28.8% in Q3 2024 due to drought affecting maize, soybeans, wheat, and sunflower crops, as well as adverse weather impacting fruit and vegetable production.

South Africa is rich in mineral resources. The country is among the world's largest producers and exporters of gold, platinum, chrome and manganese, the largest palladium producer and the fourth-largest producer of diamonds - with the mining sector accounting for around 6.2% of GDP (data Mineral Council). Platinum and coal are now both larger contributors to mining output than gold, as the country produces 80% of the world's platinum and has a significant share of the world's coal reserves. Coal continues to play a vital role as an energy source and contributes significantly to the economy, both through the generation of export revenue and employment. Important oil and gas reserves are thought to be situated off-coast, in the Indian Ocean, but these resources remain largely unexplored and unexploited. South Africa has diverse manufacturing industries and is a world leader in several specialised sectors, including railway rolling stock, synthetic fuels, mining equipment and machinery. Overall, the industrial sector employs 18% of the workforce and represents 24.6% of the country's GDP (with manufacturing representing 12% alone). According to the latest figures from the National Statistical Office, manufacturing production increased by 0.2% in the third quarter of 2024 compared with the preceding quarter.

The services sector employs 64% of the workforce and represents 62.6% of the country's GDP. The major sectors of the economy are finance, real estate and business services, together with general government services. South Africa has a sophisticated financial structure with an active stock exchange that ranks among the world's top 20 in terms of market capitalisation. Tourism contributes 3.5% to South Africa’s GDP, more than agriculture, utilities and construction (official governmental data). Despite not fully recovering to pre-pandemic levels, South Africa's tourism sector continues to grow, with 2024 international arrivals reaching 8.92 million—a 5.1% increase from 2023, according to Statistics South Africa.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	18.8	17.7	63.5
Value Added (in % of GDP)	2.6	24.6	62.6
Value Added (Annual % Change)	-4.8	-0.4	1.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:

59,7/100

World Rank:

99

Regional Rank:

9

 

Business environment ranking

Definition

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:

6.04/10

World Rank:

51/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Sources of General Economic Information

Ministries

Official list of ministries and their websites
Department of Trade, Industry and Competition
Department of Mineral Resources and Energy
Department of Public Enterprises

Statistical Office

Statistics South Africa

Central Bank

South African Reserve Bank

Stock Exchange

Johannesburg Stock Exchange

Economic Portals

Economy watch