South Africa’s (SA) Q1 Gross Domestic Product (GDP) growth disappointed once again at 0.1%, although it outperformed market expectations of a 0.1% contraction. However, according to Maarten Ackerman, Chief Economist and Advisory Partner at Citadel, the marginal improvement is “not something to celebrate,” as the economy remains stuck in a protracted low-growth cycle.
This print brings the full-year growth to just 0.8%, still well below 1%, and less than half the rate of the population growth. This confirms that SA continues to experience a per capita recession,
-says Ackerman.
Sector performance: Agriculture stands out
Agriculture remained the standout performer, growing nearly 16% in Q1, following 17% growth in the previous quarter. “Despite being a small sector, agriculture is one of the fastest-growing industries and critical for job creation. Its resilience is noteworthy given the ongoing political, logistical and climate-related challenges,” says Ackerman.
Transport, storage and communication were the second-strongest performers, potentially signalling stabilisation in SA’s critical transport network – a key structural bottleneck.
Manufacturing, mining and construction continued to contract, dragging overall growth. “These are the sectors that could drive sustainable growth above 2.5%, and until we address structural constraints, they will remain stuck in reverse,” he adds.
Consumers keeping the engine running
Household consumption rose 0.4% in Q1 – a slowdown from the previous quarter, which benefited from withdrawals linked to the two-pot retirement system. Ackerman notes that while the recent interest rate cut may support consumer spending, it’s concerning that consumption remains the economy’s only reliable growth driver.
Investment slumps amid uncertainty
Gross fixed capital formation – a measure of public and private investment – declined significantly in Q1, ending the post-solar boom investment cycle. “Uncertainty around the Government of National Unity (GNU), delays in budget approvals, and fragile United States-SA relations likely held back investment,” Ackerman notes.
To support sustainable growth, Ackerman argues that investment must rise from below 15% to over 25% of GDP: “This requires urgent progress on policy reform and increased private sector participation in logistics, ports, energy and infrastructure.”
The path forward: Reform and unity
“This latest GDP figure paints a familiar picture: a few resilient sectors keeping the economy afloat, while structural underperformance holds us back. Without meaningful and coordinated reform, the economy will continue to limp along, unable to meaningfully reduce unemployment or address pressing social challenges,” says Ackerman.
