The latest South-African GDP figures for Q4 2024 show that the economy grew by 0.6% after contracting in the previous quarter. Unsurprisingly, the ANC declared victory and has welcomed this miniscule growth as a sign of economic resilience, trying to paint a picture of a country bouncing back despite its many visible challenges. But when you look beyond the surface, this so-called "recovery" is fragile, uneven, and ultimately not sustainable and not sufficient. South-Africa needs rapid economic growth to create jobs, expand the economy and provide long term stability - something which can only be achieved if we chart a different economic course.

South Africa’s economic reality remains deeply concerning—a marginal increase in GDP does not change the fact that unemployment is among the highest in the world, investment is drying up, SOE’s are failing and constantly being bailed out and key industries are in decline. Worse, much of the growth in the last quarter was driven by temporary factors, not genuine economic expansion sustainable in the long run. If the government refuses to address the real issues behind our stagnation, we risk falling off the beckoning economic cliff, locking ourselves into a cycle of low growth, high unemployment, and persistent inequality without a way back to recover from it.

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A Fragile and Misleading Recovery

The government’s celebrations ignore a crucial fact: this 0.6% growth is not the result of broad-based economic expansion, but rather a few volatile sectors propping up an otherwise struggling economy. A closer look at the numbers shows that much of this growth came from agriculture, household consumption, and an artificial boost from declining imports, while major industrial sectors—such as manufacturing, transport, and mining—continued to shrink.

Agriculture was the single biggest contributor to GDP growth in the fourth quarter, expanding by 17.2%. This alone lifted the overall GDP figure by 0.4 percentage points—meaning that without this spike, the economy would have grown by a mere 0.2%. While this may sound like a promising development, it is important to remember that agriculture is a highly seasonal and volatile sector which is extremely dependent on often uncontrollable variables.

The same sector that soared in the fourth quarter had declined sharply in the previous quarter. This suggests that what we are seeing is not sustained growth, but merely a correction—a rebound from an earlier slump rather than an indication of long-term stability. If agriculture falters again in the next quarter, GDP could easily slip back into negative territory.

One of the more worrying aspects of this GDP report is that household consumption, not business investment, was the main driver of growth. In the fourth quarter, consumer spending increased by 2.3% year-on-year, with households buying more clothing, food, and household goods.

At the same time, investment in fixed assets—such as infrastructure and machinery—declined. This is a major red flag for the future and for future development and advancement. When businesses invest in new factories, equipment, and construction, it signals confidence in future economic growth, enables businesses to increase production and to keep up with the latest technological developments. The fact that this investment is shrinking suggests that businesses are uncertain about the future and unwilling to expand even after the first 6 months of the GNU despite the optimism that they have been fed by the GNU. Without private-sector investment, South Africa will struggle to generate the long-term growth and job creation it so desperately needs to stabilize its economic ship.

Furthermore, one of the quirks of GDP calculation is that a decline in imports can boost the final GDP number. In this case, lower imports contributed positively to GDP growth, making the economy appear stronger than it actually is. But in reality, this is not a sign of strength—it is a warning signal. The celebrated growth does not signal a new economic dawn, it is just merely papering over the cracks.

A decline in imports often means that local businesses and consumers are struggling to afford foreign goods. It suggests weaker demand, supply chain disruptions, or a struggling manufacturing sector unable to source raw materials. Some, like the ANC, may point to this as a technical boost for GDP, but in reality, it is a symptom of an economy under high strain.

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Seven Industries in Decline

While the government trumpets the overall GDP growth figure, it conveniently ignores the fact that seven major industries actually declined in the fourth quarter. The manufacturing and transport sectors were the biggest losers, highlighting deep-rooted structural issues that are not being addressed. Both key sectors whose expansion through strategic investment and support can be fundamental in spearheading the charge towards rapid economic growth and industry expansion.

Manufacturing—a key driver of industrial jobs and exports—continued to struggle, dragged down by weak production levels in the metals, machinery, and automotive divisions. Years of policy uncertainty, high production costs, and collapsing infrastructure have left this sector unable to compete on the global stage. Furthermore, there is no indication of any intervention or policies that will aid in addressing these fundamental shortfalls hampering the sector.

The transport sector, meanwhile, has now contracted for four consecutive quarters. This should be a major concern. Efficient transport is the lifeblood of trade and economic activity—without it, businesses struggle to move goods, commuters face rising costs, and economic efficiency deteriorates. The continued decline in this sector reflects a failing logistics network, from Transnet’s collapsing rail infrastructure to the crisis at South African ports.

Mining, historically one of South Africa’s most important industries, also declined in Q4. But what makes this decline particularly troubling is that some mining companies relied on existing stockpiles to meet export demand rather than increasing production.

This is a clear warning sign. If the mining sector was confident in future demand, it would be ramping up production—not simply selling from reserves. Instead, it appears that operational challenges, policy uncertainty, and ongoing logistical bottlenecks are making it difficult for mining companies to expand their output.

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What Needs to Change?

The GNU’s economic strategy is based on state control and excessive government intervention, which has only led to stagnation. If South Africa wants to escape its current economic quagmire, it must implement serious, market-driven reforms:

● Reduce regulatory red tape to make it easier for businesses to start and grow, especially SMEs.

● Reform restrictive labour laws to encourage job creation.

● Attract private and international investment by improving infrastructure and policy certainty creating a pro-business environment.

● Deregulate key industries such as energy and transport to increase competition and efficiency.

● End state-owned enterprise bailouts that drain public resources and rather divert public resources to improve infrastructure and invest in education.

The private sector—not the state—is the real engine of economic growth. Countries that have prioritised economic freedom, such as Singapore and South Korea, have lifted millions out of poverty through policies that promote entrepreneurship, develop skills, advance education, promote investment, and competition. South Africa must learn from these examples and stop relying on government intervention as the default solution, which has clearly not succeeded. Instead we must decide to pursue a new path, a clearly outlined path enabling businesses and the private sector to succeed.

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