SA's Economy: Growing, But Not Fast Enough

The Q4 2025 result

South Africa's economy grew 0.4% quarter-on-quarter in Q4 2025 — seasonally adjusted and annualised — marking five consecutive quarters of expansion. Finance was the star performer, rising 1.4%. Manufacturing disappointed again, falling 0.6%.

For the full year 2025, GDP rose 1.1%. That is the highest annual growth rate since 2022, and better than the dismal 0.5% recorded in 2024 and the 0.7% in 2023.

"Five consecutive quarters of positive growth — but "positive" masks how fragile that growth is."

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.

Most development economists argue South Africa needs sustained GDP growth of 5% or more to meaningfully reduce the 31% unemployment rate. The World Bank and IMF have similar benchmarks for the level of growth needed to reduce structural poverty.

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

The structural constraints on South African growth are well documented.

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.