SA's Economy: Growing, But Not Fast Enough

Recent GDP trajectory

After six consecutive quarters of expansion through Q1 2026 (+0.4%), real GDP contracted by 0.2% quarter-on-quarter in Q2 2026 (seasonally adjusted, constant 2015 prices). Mining (-3.0%), trade (-1.9%), and manufacturing (-1.8%) were the main drags, while finance (+0.3%) and personal services (+0.6%) showed modest growth.

For the full year 2025, GDP rose 1.1%. That was the highest annual growth rate since 2022, but the Q2 2026 contraction highlights the ongoing fragility of the recovery ahead of Stats SA's planned national accounts rebasing.

“A 0.2% contraction in Q2 2026 ended six quarters of expansion, underscoring how fragile growth remains.”

Why 1.1% is not enough

South Africa's population grows by roughly 1% per year. That means GDP must grow by at least 1% just to keep GDP per capita flat. At 1.1%, 2025 growth barely kept the country's head above water on a per-capita basis.

South Africa has not grown above 3% since 2011 — more than a decade of sustained underperformance. Over that period, the economy grew at an average of around 1% per year in real terms.

What held the economy back

Load-shedding — scheduled electricity outages — inflicted billions of rands of economic damage each year from 2022 to 2024. The situation improved significantly from late 2024 as Eskom's maintenance programme bore fruit and new renewable energy capacity came online. But load-shedding has not been eliminated, and its legacy damage to business confidence and investment takes time to repair.

Logistics constraints also remain severe. Transnet, the state freight rail and ports company, has struggled with operational problems, theft of infrastructure, and deferred maintenance. Mining and agricultural exporters — the backbone of South Africa's current account — have been particularly hard hit.

Manufacturing recorded its second consecutive year of negative growth in 2025. Construction posted its ninth straight year of decline. Both sectors are critical for labour-intensive job creation.

Bright spots and reasons for cautious optimism

Agriculture had a strong 2025, boosted by good rains and improved horticulture output. Finance and business services continued to expand. Tourism has recovered strongly from the post-pandemic trough.

Perhaps most significantly, South Africa was removed from the Financial Action Task Force (FATF) grey list in late 2024 — a development that should, over time, reduce compliance costs for South African businesses operating internationally and improve access to foreign capital.

Sovereign credit rating agencies have also taken note of improved fiscal discipline. Moody's and S&P both cited better-than-expected fiscal consolidation in their mid-2025 reviews, though South Africa's rating remains sub-investment grade.