South Africa is at risk of underperforming its 2024
economic growth forecasts after a 0.3% q/q GDP contraction in Q3, leaving
growth at just 0.4% for the year so far. The weak economic performance in
the three months through September was primarily due to a sharp decline
in agricultural output, which contracted by a staggering 28.8% due to
drought conditions that impacted key crops such as corn, soybeans, wheat,
sunflower, and vegetables. The poor quarterly GDP performance casts
doubt around National Treasury and the SARB’s full-year growth forecasts
of 1.1%, which now appear increasingly optimistic.
It is true that sentiment among consumers and businesses has improved
following the formation of the GNU and the prospects of improving
economic conditions, which can be seen in some of the subcomponents of
the latest print. The economy will likely perform better in Q4 and through
next year, as improving consumer sentiment, softer inflation, and interest
rate cuts support growth. More broadly, it is also encouraging that
investment in the economy is showing signs of emerging from a downturn,
which potentially points to a sustainable improvement in growth going
forward. However, South Africa desperately needs reforms to reduce red
tape, encourage investment spending and privatise some functions of the
State to shift the country’s growth trajectory higher