There is no getting around the fact that South Africa’s economy is displaying a concerning inability to grow at a meaningful rate. (Photo: iStock) South Africa’s gross domestic product (GDP) grew a paltry 0.4% on a quarterly basis in the fourth quarter (Q4) of 2025 following a 0.3% expansion in Q3 – a downward revision from the original estimate of 0.5% – a dismal read that will do little to inspire confidence that the economy can grow at the pace needed to make a dent in unemployment and poverty.
It all adds up to growth of just 1.1% for 2025, following 2024’s woeful 0.5% expansion. This falls well short of the 1.4% that the Treasury estimated just two weeks ago when Finance Minister Enoch Godongwana unveiled his latest budget, and could blow gaping holes in the projections to cap South Africa’s debt burden at 78.9% of GDP.
The only good news is that the pace has accelerated from 2024’s base, which was a pretty low bar.
The economy simply remains stuck in the global growth slow lane with other countries flying past on the road to relative prosperity.
What this means
After a disappointing 2025, the growth outlook for 2026 has now been clouded by the raging conflict in the Middle East. Treasury’s projection for 2026 growth of 1.6% will only be enabled by the low base of 2025, and the twin shocks of surging oil prices and a weaker rand threaten to reignite inflation and halt – or potentially reverse – the cycle of falling interest rates.
As things stand now, South Africa may be lucky to achieve growth of 1.6% in 2026. Failure to do so will inevitably see debt-to-GDP projections rise and potentially put paid to South Africa’s goal of stabilising the debt burden unless dramatic cuts to government spending are made– and that seems unlikely in an election year.
For South Africa, the data reveals that the pot-holed road to deindustrialisation remains firmly intact.
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Production in the mining sector contracted 0.6% in Q4 compared to Q3, when it grew 2.4%. The manufacturing sector also shrank by 0.6% in that period, after barely growing 0.2% in Q3 on a quarterly basis.
These are the economy’s industrial arms and they are losing their muscle tone as they wither into skeletal versions of their former rippled selves. And this despite the jolt of energy that Eskom’s newfound reliability has injected into the veins of industry.
Worryingly, the labour-intensive construction industry posted a 1.3% decline. The finance industry, by contrast, was the star – it can make a buck in good times and bad – posting growth of 1.4%.
Agriculture, for its part, managed to eke out growth of 0.4% in Q4, but for the whole year it was on a rollercoaster and ended up expanding 17.4% for all of 2025. And it would have fared much better were it not for the foot-and-mouth disease and swine fever outbreaks.
“On balance, industry weighed on growth, while household consumption provided support, with somewhat encouraging signs coming from fixed investment,” said Jee-A van der Linde, senior economist at Oxford Economics Africa.
Indeed, one green shoot was the 1.3% Q4 growth in fixed capital formation, which is a broad measure of investment. This followed a 1.4% spurt in Q3, reversing three straight quarters of decline before that. Hopefully, the seeds sown will help to provide the roots for future growth.
Same old constraints
But there is no getting around the fact that South Africa’s economy is displaying a concerning inability to grow at a meaningful rate that far outstrips population growth and absorbs the swelling ranks of new entrants into the labour market.
“We haven’t even started the new fiscal year, and the growth forecasts already seem to be disappointing expectations. That doesn’t even include the impact of the Iran war, all of which means it’s unlikely that the overall debt/GDP ratio, the interest on debt, or the budget deficit will match expectations. Not a great start for a government that wants to target another credit upgrade,” said George Glynos, head of research at ETM Analytics.
The constraints have long been recognised and include – to name just a few – burdensome and often conflicting regulations, policy inertia, chronic skills shortages, endless “master plans” that are simply talk shops, and the twin plagues of crime and corruption on a breathtaking scale.
Solutions have been found in some cases to these vexed problems, but on the wide stage of what should be a vibrant economy – blessed with a resourceful population that knows how to hustle and make a plan on top of abundant natural resources – they remain elusive. DM