SA’s economy grew 1.1% in 2025

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JIMMY MOYAHA: South Africa’s GDP data was released this morning [Tuesday 10 March], data that points to a year-on-year growth of 1.1% in South Africa’s economy. We’re going to look at this and reflect on this number in more detail with the chief economist at Citadel Investment Services, Maarten Ackerman. He joins me on the line now to see what we make of these numbers.

Maarten, lovely having you on the show, as always. Thanks so much for taking the time. Any surprises from a GDP perspective? I imagine as South Africa we guided for some of these numbers throughout the year, and it helps that we review them on a quarter-on-quarter basis. But any surprises as to where we closed out the year for 2025?

MAARTEN ACKERMAN: No, not really. I think the fourth quarter was pretty much in line with expectation and, like you said, for the year we printed 1.1%.

That’s a better number than in the last three years. But it’s all relative because 1.1% is still a very bad number.

If you compare that to the growth in the population, which is about 1.5%, it means that we add more people every year to the economy than goods and services and, while that’s the case, we’re in a per capita recession.

So although the number is better than what we’ve seen of late, it’s still not where we want it to be. But we are hopeful.

There are some positive signs that we can build on and then in time probably deliver better results.

JIMMY MOYAHA: Maarten, what continues to constrain our economy? We happened to get a couple of things right towards the tail end of 2025, [from] the likes of coming off the grey list to the likes of having improved sentiment come our way. Yes, some of those factors might take a bit longer to filter into numbers like the GDP and the measurement of the economy, but every single time we have this conversation around the growth of the economy, we seem to be lagging behind these expectations. Where do our bottlenecks still sit?

MAARTEN ACKERMAN: It’s the same old story about the logistics more recently the water supply, electricity, rail, harbours – so everything that puts a cap on how productive we can be with what we’ve got in terms of exporting.

Last year we had the commodity boom. We exported a lot. It helped a lot. Obviously we saw that in the budget, but we could probably have done more if we hadn’t had those bottlenecks in terms of exporting more of those kinds of commodities that were demanded globally. So that’s still the issue.

You are 100% right that we need time to resolve that.

The ease of doing business is another thing that makes it quite difficult to do business.

And if you look at the numbers, last year agriculture and financial services were the two main contributors to the annual growth. Now, this economy can’t really grow firing on only two cylinders, especially if most of it is coming from agriculture.

Agriculture is fast growing. It is resilient, but it’s a small part of the economy.

So we don’t see growth yet in mining and in manufacturing, which are so important. And construction. In some of the quarters we had positive numbers, but for the year we’re still down. They are really facing some of those structural issues and it’s only when we’re going to turn that around in those sectors where we are going to see higher and more sustainable growth, because they are also the kind of industries that can create jobs for the skill base that we have in South Africa.

JIMMY MOYAHA: Speaking of that skill base in South Africa, Maarten, I want to take a look at the domestic factors. You touched on the fact that increasing exports is always a good thing from a business perspective. I want to zoom in on the local market and get a sense – perhaps from a growth perspective – what needs to start to happen there for us to be able to really benefit from a stronger local economy and, by extension, a stronger GDP number.

MAARTEN ACKERMAN: From the local market we need to remove some of the red tape. If you think about the budget, they’ve lifted the Vat registration from R1 million to R2-point-something million.

A lot of people ask ‘But will that really make a difference?’ Yes, it will make a big difference because your economy really grows on the ground through small businesses.

It’s very difficult for a big, big mining company to grow exponentially and add significant jobs. Your multiplier is sitting in the small businesses.

Now, if a small business needs to spend most of its admin time focusing on registering for and paying Vat and running all those systems, it takes one’s eye off the ball. So those small things that the government is implementing make a huge difference. But again, you won’t see the results now; it will take time.

In today’s print as well we’ve seen another quarter of very strong growth [in] fixed capital formation. That’s basically reinvesting back into the economy. About 70% of that number was driven by the private sector. The crowding in the private sector – trying to rebuild capacity – is the first step, really.

We need to rebuild what we’ve lost over the last call it 15 years before we’re going to see higher growth than 1%.

So if you look at the 1.1% growth number, it shouldn’t really be a surprise, given that our fixed capital formation as a percentage of GDP is sitting at 14%, whereas it should be about 30% according to the National Development Plan.

So we need to focus on rebuilding capacity before we can really hope for or see any high economic numbers.

JIMMY MOYAHA: Maarten, before I let you go, I want to get your thoughts on where we go from here. We know that globally the risk sentiment that exists out there in the market has had global estimates revised down, including global growth, and has had inflation globally revised up. We know that locally that would have an impact on how our Monetary Policy Committee reviews the risk associated with the South African economy.

Does this mean we are no longer going to get interest rate cuts? Where do we stand on that, and what does that mean for our economy going into the new year?

MAARTEN ACKERMAN: I think everyone’s been quite hopeful that we’ll see further rate cuts and now, with what’s going on in the Middle East, there is still a lot of uncertainty.

It all depends on how long this continues and how long the oil price remains quite elevated. But if that scenario plays out we are definitely going to see upward pressure on inflation.

Oil is our biggest import item. The rand is slipping under these conditions. So that means it’s very difficult for the Reserve Bank to commit to those rate cuts that we expected.

In fact, we might actually see a rate hike in that kind of environment, which is bad news for economic growth as well.

So yes, there’s still a lot of uncertainty. Yesterday the Reserve Bank said they are reassessing; we will see what comes out there. But I think rate cuts are off the table for now.

JIMMY MOYAHA: Rate cuts might be off the table, growth not looking as we expected it to, but there might still be green shoots in the South African story – and we might still be able to achieve them.

We’ll see how the new year plays out as we continue to go into 2026. For now we’ll leave this conversation on that note. Thanks so much to the chief economist at Citadel Investment Services, Maarten Ackerman, for joining us to look at GDP numbers.