South Africa’s economy faced a turbulent 2024, marked by slow growth, high unemployment, and lingering structural challenges. While the formation of a Government of National Unity brought political stability and a stronger rand, economic contractions, drought-stricken agriculture, and inadequate education outcomes have stalled meaningful progress argues, Prof. Bonke Dumisa. Picture Zanele Zulu / Independent Newspapers.
The South African economy had a bad start in 2024 from different angles.
This year 2024 was a crucial National and Provincial Elections Year with a very high anti-ANC sentiment and a mushrooming of many highly-financed new political parties, most of which were somehow working closely with the Democratic Alliance, DA, on what they called the “Moonshot Pact”.
To complicate things further, the former ANC President and the former President of the Republic of South Africa Jacob Gedleyihlekisa Zuma had just appropriated to himself the name of the ANC armed wing Umkhonto Wesizwe by forming an anti-ANC political party called “Umkhonto Wesizwe”.
The country had been and still is on “Junk Status”, sub-investment grade, since 29 April 2020, which is the date by which all the three top international credit rating agencies, namely Standard & Poor, Fitch, and Moody's had already downgraded South Africa to sub-investment grade.
The country was and still is heavily in debt, with a government debt now at over R6 trillion, with a GDP-to-Debt ratio of over 70%, with the country spending at least over R1 billion per day, that is an annual debt servicing cost of over R366 billion, just on servicing the costs of debt, that is, before even beginning to pay off the principal debt.
The country had been hard-hit by an unending load-shedding by Eskom, which in turn was severely destroying the South African economy.
We had just emerged from a very difficult year 2023 where we had a mere 0.6% GDP growth rate, and a mere 0.1% GDP economic growth in the fourth quarter of 2023.
The annual national budget presented by the national Minister of Finance Enoch Godongwana in February 2024 was a highly balanced budget; which was definitely “not a reckless vote buying budget”.
Our serious concerns that this year’s 2024 budget was going to be negatively heavily loaded by the National Health Insurance, NHI, were fortunately proven wrong.
Eskom has implemented no load-shedding since March 26 this year; which means we have already had over 250 load-shedding-free days in 2024 to date.
We unfortunately started the year 2024 with a GDP economic growth contraction of 0.1% in the First Quarter; which was followed by a small GDP economic growth rate of 0.4% in the Second Quarter, and unfortunately went back to yet another GDP economic growth contraction of 0.3% in the Third Quarter.
Many people have been asking a very crucial question, whereas we fully understand why we had a GDP economic contraction in the First Quarter, probably partly because of continuing Eskom load-shedding for most parts of the First Quarter of 2024 up to the 25th of March 2024; they are now asking why is it that we had a GDP economic contraction in the Third Quarter despite no load-shedding during that Quarter?
Going through the entire Statistics South Africa, StatsSA, announcement, it is clear that it was mostly the agricultural sector which pulled all other sectors down when it had a GDP economic contraction of over -28%.
According to the StatsSA report the very bad agricultural sector contraction was mainly due to the severe drought conditions and adverse weather conditions that our agricultural sector performed so badly. This was beyond the control of the South African government.
One major positive surprise of the year was that, whereas many people expected general mayhem in South Africa, after the 29th of May 2024 general national and provincial elections, where the ruling ANC political party was expected to significantly lose their parliamentary majority, which it lost to just less than 40%; to the surprise of most South Africans the ANC and the DA immediately decided to work together, together with the IFP and other smaller parties.
The global economic markets were excited and appreciative of this development, and they believed that the working of these two former arch-political rivals was going to bring more political certainty and economic certainty to South Africa.
The South African Rand has significantly strengthened against the US dollar, the UK Pound Sterling, and the European Union’s Euro ever since the formation of the “Government of National Unity”, the GNU.
This partly helped in reducing the costs of buying international crude oil, hence the many fuel price cuts we have had in South Africa over the past six months.
The very high unemployment rate has however remained stubbornly high throughout the year, and it will remain that high, above 30% for the official unemployment rate; and at above 40% for the expanded definition of unemployment rate which also includes “the discouraged work-seekers”. This is because of the acceptance of the fact that we have structural unemployment challenge in South Africa.
Our challenge is that our education system generally produces people who are “not fit for purpose” for the economic needs of the country.
We need a total overhaul of our entire education system for us to seriously address our very high unemployment rates.
The South African government, through the National Treasury and the South African Reserve Bank, had forecast a 2024 GDP economic growth rate of 1.1%. Given that we have already had two GDP economic growth contractions in 2024, there’s no chance that South Africa will have a GDP economic growth rate of over 1% in 2024.
Our economic growth rate for 2024 is going to be less than 1%.
Given that South Africa has a population growth rate of at least 1.33%, it is an economic challenge that we have an economic growth rate which is lower than our population growth rate; it means that the country cannot start to seriously address the unemployment rates under those circumstances.
Our hope and the prediction by many people who understand both the South African macroeconomic trends and South African microeconomic trends is that the South African economy will slightly improve in 2025, despite the regular condescending actions by the DA within the GNU, which regularly threaten the continued existence of the GNU.
We also hope that the South African economy will slightly improve despite US President-Elect and Former President Donald Trump’s many anticompetitive TARIFF threats all over the show.
**Prof. Bonke Dumisa is an independent economic analyst.
*** The views expressed here do not necessarily represent those of Independent Media or IOL.
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