In the second quarter of 2025, unemployment edged up to 33.2% in the second quarter of 2025 from 32.9% in the previous quarter, while of the 10.1 million people aged 15 to 24, 35.2% were not in employment
Although the outlook is still pretty bleak, one thing we can say about the economy in 2024 is that it will probably not be as bad as it was last year.
This isn’t saying much, given that 2023 was one of the toughest in recent memory — save for the first year of the Covid-19 pandemic, which left the domestic economy with a number of handicaps, some of which have proved awfully stubborn to overcome.
That said, 2024 will probably offer relief on two fronts: with the energy crisis having receded somewhat, and with renewable infrastructure investments in the pipeline, there is a good chance growth will improve.
Meanwhile, easing inflation suggests there are interest rate cuts on the horizon, which will be a boon to pinched consumers.
When talking about the economy in 2023, it is impossible not to mention 2020, which set off a ripple effect that will probably be felt well beyond this year. South Africa’s GDP contracted 6.4% that year and the economy endured nothing short of a jobs bloodbath.
The pandemic’s economic onslaught caused the already ultra-high jobless rate to peak at an eye-watering 35.3% in the fourth quarter of 2021. Despite a series of retreats last year, the unemployment rate has yet to return to its pre-Covid level.
Meanwhile, South Africa’s real GDP recovered, albeit slowly, surpassing the R1.15 trillion recorded in 2020 by about R5 billion in the third quarter of 2023.
Apart from GDP contraction, South Africa’s economy also dealt with the consequences of the world’s recovery from the pandemic. Global supply chains could not withstand the sudden rally in demand, which caused supply-side inflation to climb. Moreover, in the US — which tends to be a barometer for financial conditions — hopes were dashed that inflation would be transitory amid tightness in the labour market.
Russia’s invasion of Ukraine in 2022 added insult to injury on the inflation front, causing food and energy prices to skyrocket.
Monetary policymakers, including the South African Reserve Bank (Sarb), responded to stubbornly high inflation by raising interest rates — throwing cold water on economic growth. The bank has hiked the cost of borrowing by a cumulative 475 basis points since November 2021, bringing the repo rate to a 14-year high of 8.25%.
Economists generally expect growth to pick up, albeit marginally, and that inflation will continue to come down in 2024, though there are still various risks to this outlook.
After the release of South Africa’s third-quarter GDP data last month, PPS Investments portfolio manager Reza Hendrickse noted that economic growth is expected to accelerate in 2024 from last year’s low base.
“This is largely a function of load-shedding easing somewhat as the power crisis comes under control,” Hendrickse said.
“On the consumer side, lower inflation is also positive, while any rate cuts from the Sarb should also support spending growth. Any softness in global growth next year [2024], however, may put a dampener on temporary respite in SA.”
This year could see certain economic tailwinds, including an expansion of renewable investments, Citi economist Gina Schoeman told the Mail & Guardian.
“At the same time, in 2024, you’ve got a consumer that will start to enjoy lower inflation, interest rate cuts and potentially additional savings through the two-pot retirement system,” Schoeman added.
The two-pot retirement system — which will allow workers to access a portion of their pension savings without having to resign from their jobs — is not a done deal yet. But the treasury and parliament’s finance standing committee have agreed to a proposed starting date of 1 September 2024.
“So, for the first time in almost a decade, you could see both sides of the economy growing — both investment and consumption,” Schoeman noted.
“But what is important there is how much that enables investment to pour into other parts of the economy, not only renewables.”
There are still significant constraints on growth, including the ongoing electricity shortages, the Transnet-induced logistics crisis, incredibly weak business confidence and very little investment, noted Peter Worthington, a senior economist at Absa.
He said the country was also navigating extremely tough fiscal conditions and this year’s general election would add to uncertainty.
“We really don’t know what kind of political dispensation the elections are going to produce and therefore what kind of government we’re going to get after them.”
There is good reason to believe that the disinflation trend will continue in 2024. Despite the Reserve Bank having put in a strong effort to beat back inflation, a lot has been out of the central bank’s immediate control.
“These include global price shocks — Covid, oil, the Ukraine war pushing up cereal prices. It’s climate shocks. It’s fiscal laxity. It’s sudden rand volatility. It’s all of those things. So, I think the Reserve Bank is doing a great job but not all of inflation is under control,” Worthington said.
According to Schoeman, the first half of 2024 is mired with risks, with a critical election coming after an equally important budget.
Once polls start coming out, markets will begin to get a sense of how responsibly or irresponsibly the ANC might be willing to act to shore up its support, Schoeman said.
“Obviously, that is an uncertainty right now, but those sorts of risks may end up weighing on us even more,” she added.
“There could be a downside risk to how much inflation can come down, a downside risk to how much the Sarb can cut rates. And therefore it’s a downside risk to how much renewable investments can add to growth, enabling it to trickle into other parts of the economy.”