Positive economic indicators boost South Africa’s growth trajectory

Government has embraced further positive developments in the economy, viewing them as vital steps towards alleviating household pressures and bolstering SA’s growth trajectory.

Nomonde Mnukwa, acting director-general of the Government Communication and Information System, said that government’s resilient optimism was reinforced by the second quarter’s economic progress, which saw a rise in GDP, a cut in the repo rate, and a decrease in fuel prices.

Data released by Stats SA in September showed that the GDP rose by 0.4% in the second quarter, following 0% growth in the first quarter. In addition, the Reserve Bank cut the country’s repo rate by 25 basis points, bringing it down to 8%. This was the first repo rate cut since 2020. On the fuel front, the petrol price decreased between R1.06 and R1.14.

In an interview with the South African Government News Agency, Mnukwa said these developments offered much-needed relief to South Africans, particularly against the backdrop of the high cost of living.

“The challenge we’ve been facing has been the very high cost of living, so these developments, while marginal, are certainly a relief for households. The cut in the repo rate, for instance, provides some breathing room for families with loans, whether it’s a home, car or personal loan, by reducing the interest they are required to pay,” she said.

The cut in the repo rate lowers borrowing costs, giving households a bit more disposable income and allowing them to better meet their needs.

“This additional disposable income enables South Africans to stretch their rand in terms of their other needs,” said Mnukwa.

Lower fuel prices were also recognised as an important component of household relief both in terms of transport and food prices. Mnukwa noted that this would reduce the cost of travel for both those who were employed and job seekers alike.

“The cut in fuel rates brings relief in terms of travelling expenses. While the reduction may be marginal, when combined with the repo rate cut, we believe it will start to make a difference for individuals,” she said.

Growth in GDP and employment a sign of recovery

Government was also encouraged by the GDP expansion following stagnation in the first quarter. Household consumption was the largest contributor to this growth, reflecting the renewed confidence and spending power of South Africans.

Mnukwa highlighted the importance of this development as a signal that the government’s efforts were beginning to bear fruit.

“What we’re seeing is the start of the positive results of the efforts government has put in place to ensure that it grows the economy and also creates jobs. [This demonstrates] that the efforts that government is putting in place are starting to yield results.”

Stats SA noted that expenditure on real GDP increased by 0.5% in the second quarter of 2024, following a decrease of 0.1% in the first quarter of the year.

This improvement is seen as an indication that SA’s economic policies are beginning to stabilise the economy, even amid global challenges.

In addition to GDP growth, SA saw a modest rise in employment, with 42,000 (0.4%) new jobs created in the formal non-agricultural sector, bringing the total employment level to 10.7-million. This is according to the Quarterly Employment Statistics survey released by Stats SA.

Mnukwa noted that these gains represented progress towards reducing the country’s high unemployment rate.

Key sectors driving the economy

Mnukwa highlighted several key sectors that were driving SA’s economic growth and job creation.

“The agricultural sector has been a standout performer, surpassing the national GDP growth rate and creating 950,000 jobs in 2023. Similarly, the tourism industry has seen remarkable growth in arrivals, income and job creation, making a notable contribution to the country’s GDP,” she said.

The acting director-general added that the completion of the spectrum auction and analogue switch-off had significantly improved network quality, reduced data costs and expanded digital access across the country.

The government’s large-scale land restitution and redistribution programme has also made substantial progress, with 24% of SA’s farmland now owned by black farmers.

Over the past three decades, the agricultural economy has grown robustly, generating thousands of jobs.

Additionally, government is prioritising the Gas Master Plan, which aims to secure a stable gas supply by diversifying both local and international sources. The plan outlines the role of natural gas within SA’s energy mix and provides clear policy direction for the industry.

Challenges remain but optimism prevails

Mnukwa acknowledged the ongoing geopolitical challenges posed by the global socioeconomic landscape. “We are a player in the global space, so we are not immune to the challenges that are happening internationally. SA’s international agenda remains intrinsically linked to the achievement of our developmental agenda, which has the improvement in the quality of life for South Africans [at its heart],” she said.

The acting director-general reinforced the government’s commitment to creating an enabling environment for economic growth and job creation, stating that the recent gains in GDP and employment numbers were a testament to that commitment.

“The growth we’re seeing now bears testament to the promises made during the State of the Nation Address earlier this year to ensure positive economic growth that will encourage business development and provide more employment opportunities.

“We will continue to work towards a thriving economy that benefits all South Africans,” she said.

This article was sponsored by the South African Economic Reconstruction and Recovery Plan.