Maarten Ackerman, Chief Economist at Citadel Investment Services, comments on South Africa’s Q4 2025 Gross Domestic Product (GDP) Data announced by StatsSA.

South Africa’s Gross Domestic Product (GDP) for Q4 2025 has been released, revealing a year-on-year growth rate of 0.9%, in line with expectations but still weak in the broader economic context. While a technical recession was avoided, economic growth continues to lag behind population expansion, keeping the country in a per capita recession.

SECTOR PERFORMANCE AND KEY DRIVERS

“Although South Africa (SA) managed to avoid a technical recession, the reality is that growth remains weak,” says Maarten Ackerman, Chief Economist at Citadel. “The economy is expanding at a rate below population growth, meaning that per capita income continues to decline.”

Agriculture rebounded significantly in Q4, growing by 17% due to a base effect after a sharp contraction in Q3 of 2024. However, Ackerman notes that “agriculture remains a highly volatile sector, and while its strong performance in Q4 contributed nearly 50% of the quarter’s overall growth, it does not reflect a sustainable driver of economic expansion.” Other contributors to economic activity included trade, catering, and accommodation, which benefited from a recovery in tourism, along with finance and real estate. However, key productive sectors such as mining and manufacturing continued to decline, highlighting the uneven nature of growth in the economy.

CONSUMER SPENDING AND INVESTMENT TRENDS

Despite high unemployment rates, inflationary pressures, and interest rates remaining elevated, consumer spending increased for the third consecutive quarter. “Consumers have shown some resilience despite economic headwinds, with clothing and footwear seeing a notable 4.4% increase in spending,” Ackerman explains. “The two-pot pension withdrawal system also provided a short-term boost to household consumption, but this is not a sustainable source of long-term growth.”

Investment concerns remain high, as gross fixed capital formation, an essential indicator of economic reinvestment, recorded another negative quarter. “The continued decline in investment, particularly in residential construction, reflects weakened business confidence and limited long-term growth prospects,” says Ackerman. “Without a turnaround in investment, SA’s ability to drive sustained economic expansion will remain constrained.”

INFRASTRUCTURE AND GLOBAL TRADE DYNAMICS

Loadshedding relief provided a small boost to economic activity in Q4, as power disruptions were significantly lower than in previous quarters. However, infrastructure constraints, particularly at ports and railways, continue to hinder economic momentum. “The easing of loadshedding was a welcomed development, but broader infrastructure challenges remain a significant drag on growth,” Ackerman noted. "Until logistics and transport bottlenecks are addressed, these constraints will continue to hold back economic potential."

While global trade dynamics had minimal impact in Q4, rising geopolitical tensions, especially in relation to the United States (US), pose risks for SA’s trade relationships in 2025. “We are entering a period of increased global uncertainty, and SA will need to navigate these challenges carefully to protect its trade interests,” says Ackerman.

MONETARY POLICY AND FISCAL OUTLOOK

While inflation has stabilised, interest rates remain high, limiting the potential for monetary policy to stimulate growth. The upcoming National Budget Speech on the 12^th of March and the Monetary Policy Committee (MPC) interest rate decision on the 20^th of March will be key events to watch. “A potential Value-Added Tax (VAT) increase remains on the table as the government looks for additional revenue sources,” Ackerman cautions. “Meanwhile, the South African Reserve Bank (SARB) is likely to keep interest rates on hold in the near term, with potential rate cuts only coming in the second half of 2025 if inflationary pressures ease.”

LOOKING AHEAD: ECONOMIC PROSPECTS FOR 2025

Looking ahead, government policy implementation remains slow, but if sustained reforms take hold, a return to 2%+ growth is possible, though not in the immediate future. “SA must accelerate economic reforms and investment efforts to ensure a more stable and resilient growth path,” Ackerman emphasises. “Without meaningful structural change, we will continue to see lacklustre growth with limited job creation.”

Additionally, global trade shifts and political risks could introduce further volatility. “The international landscape is becoming more complex, and SA needs to be proactive in securing its economic position,” Ackerman adds.

The SA economy faces a challenging 2025, with slow growth, policy uncertainty, and global trade risks shaping the outlook. While positive developments in certain sectors provide some optimism, sustained economic recovery will depend on structural reforms, improved investment confidence, and policy execution. “The next quarter will be crucial in determining whether SA can build momentum toward stronger and more inclusive growth,” Ackerman concludes.