South Africa’s GDP Grows by 0.1% in Q1 2025 as Agriculture and Transport Lead Recovery
By Karabo Marifi
South Africa’s real Gross Domestic Product (GDP) increased by 0.1% in the first quarter of 2025, reflecting a sluggish but continued economic recovery following years of strain caused by the COVID-19 pandemic. This marginal growth follows a slightly stronger 0.4% expansion recorded in the final quarter of 2024. According to Statistics South Africa (Stats SA), the economy remains on a gradual path to recovery, clawing back from the significant contraction experienced during the pandemic when GDP fell to a historic low of R954 billion in Q2 2020. By Q1 2025, GDP had risen to R1.17 trillion.
The latest figures, released on Tuesday, reveal mixed sectoral performance, with strong gains in agriculture and transport offset by notable contractions in manufacturing and mining. Analysts say the results reflect persistent structural challenges in key industries and fluctuating global economic conditions but also show signs of resilience in selected sectors.
The agriculture, forestry and fishing industry was the standout performer in the first quarter, surging by 15.8% and contributing 0.4 of a percentage point to the overall GDP growth. This strong performance was driven by increased activity in horticulture and animal production, which have benefitted from favourable weather conditions and improved global commodity demand.
The transport, storage and communication industry also recorded solid growth of 2.4%, contributing 0.2 of a percentage point to GDP. According to Stats SA, this was due to increased activity in land and air transport, as well as in transport support services, signalling rising mobility and improved logistics flows across the country.
Finance, real estate and business services increased slightly by 0.2%, contributing 0.1 of a percentage point. The gains were linked to increased activities in insurance, pension funding, and auxiliary services, demonstrating continued resilience in the financial sector despite prevailing economic uncertainty.
The trade, catering and accommodation industry also grew by 0.5%, contributing 0.1 of a percentage point. Growth in this sector was largely driven by retail and motor trade, as well as improvements in accommodation and food services, highlighting sustained consumer demand in urban and tourist-driven areas.
However, not all sectors performed positively.
The manufacturing industry saw a significant contraction of 2.0%, becoming one of the major drags on GDP during the first quarter. Seven of the ten manufacturing divisions experienced negative growth, with the largest contractions seen in petroleum and chemical products, rubber and plastic goods, food and beverages, and motor vehicles. This decline points to ongoing supply chain challenges, high input costs, and weaker industrial output.
Similarly, the mining and quarrying sector experienced a 4.1% decline, subtracting 0.2 of a percentage point from the overall GDP. The contraction was mainly due to reduced output in platinum group metals, further reflecting the volatility of global commodity markets and operational disruptions within South Africa’s mining sector.
Household Spending Shows Modest Gains
On the expenditure side of the GDP, household final consumption expenditure (HFCE) increased by 0.4%, contributing 0.3 percentage points to total GDP growth. This uptick in household spending suggests a modest recovery in consumer confidence, despite ongoing pressures such as high interest rates, rising food prices, and constrained disposable incomes.
The largest positive contributions to household consumption came from transport (1.1%), food and non-alcoholic beverages (0.5%), restaurants and hotels (1.4%), other goods and services (0.6%), and health (0.8%). These trends reflect consumer spending patterns aligned with easing lockdown effects, increased mobility, and seasonal behaviour.
However, not all components of household consumption performed well. Expenditure on recreation and culture, communication, and housing-related costs decreased, indicating continued caution among consumers when it comes to non-essential or high-cost spending categories.
Government final consumption expenditure contracted by 0.1%, largely due to decreased compensation of employees and a reduction in the purchase of goods and services. This reflects ongoing fiscal consolidation efforts and budgetary constraints faced by national and provincial governments.
Gross Fixed Capital Formation Falls Sharply
A key concern highlighted in the data is the 1.7% decline in gross fixed capital formation, which reduced GDP by 0.2 of a percentage point. This decline in investment is a worrying sign for long-term economic growth and job creation.
The most significant negative contributions to investment were from residential buildings (-5.8%), machinery and other equipment (-1.4%), construction works (-2.8%), and transport equipment (-3.1%). These figures point to reduced private sector confidence, logistical bottlenecks in construction, and declining business appetite for large-scale capital spending.
Analysts note that the continued decline in capital investment poses challenges for infrastructure development, industrial productivity, and efforts to shift the economy towards a more inclusive and diversified growth model.
Trade Performance Mixed
South Africa’s trade sector presented mixed results in the first quarter. While exports of goods and services increased by 1.0%, this was overshadowed by a 2.0% increase in imports, resulting in net exports contributing negatively (-0.3 percentage points) to GDP.
The growth in exports was led by increased global demand for vegetable products, vehicles and transport equipment (excluding large aircraft), and mineral products. This reflects South Africa’s role as a key global supplier of agricultural and mineral commodities.
On the other hand, the rise in imports was primarily driven by higher volumes of chemical products, mineral products, and machinery and electrical equipment. The negative trade balance adds pressure to the already strained current account and underscores the importance of enhancing local manufacturing to reduce dependency on imported goods.
Cautious Optimism Amid Structural Challenges
While the marginal 0.1% growth indicates limited momentum, the broader recovery from the economic low point of 2020 remains on track. The jump from R954 billion in Q2 2020 to R1.17 trillion in Q1 2025 signals that, despite persistent challenges, the economy is gradually regaining lost ground.
However, the latest data highlights the uneven nature of the recovery. Sectors such as agriculture, transport, trade, and financial services continue to perform relatively well, while critical industries like manufacturing, mining, and construction remain under pressure.
Economists have stressed the need for structural reforms to unlock investment, improve infrastructure, reduce red tape, and increase electricity supply stability to enable more consistent and inclusive growth. Efforts to address youth unemployment, expand industrial output, and accelerate infrastructure investment are essential to sustain the current recovery trajectory.
Policy Implications and the Road Ahead
The South African Reserve Bank (SARB) will closely monitor these GDP figures as it deliberates on future interest rate decisions. Given the modest growth and underlying weaknesses in investment and production, some analysts believe there could be room for more accommodative monetary policy if inflation remains contained.
Fiscal authorities are also under pressure to balance spending constraints with the urgent need to stimulate economic activity, particularly in sectors lagging behind. As the country prepares for the Medium-Term Budget Policy Statement later this year, all eyes will be on government strategies to boost private investment, support SMEs, and rebuild investor confidence.
Meanwhile, continued public-private collaboration, stronger implementation of the Economic Reconstruction and Recovery Plan (ERRP), and decisive action on infrastructure, energy, and logistics bottlenecks remain crucial.
Download Here:
Direct PDF Link:
https://centralnews.co.za/wp-content/uploads/2025/05/Central-News-Issue-107.pdf
Read all our publications on magzter:
https://www.magzter.com/ZA/Central-News-Pty-Ltd/Central-News/Newspaper/All-Issues
_________
Central News also offers Sponsored Editorial Content, Podcasts , Radio / Social Media Simulcast, Video Production , Live Streaming Services, Press Conferences, and Paid Interviews (Video/Audio) etc.
We guarantee exceptional exposure, reach, and engagement, with an excellent return on investment.
Advertisement:
To place your advert on our platforms (Print Newspaper or Digital Platforms) : Please email : sales@centralnews.co.za
For Business Related:
business@centralnews.co.za
Newsroom:
Send your Stories / Media Statements To: newsroom@centralnews.co.za
General Info:
info@centralnews.co.za
Office Administrator:
admin@centralnews.co.za
Whatsapp / Call: 081 495 5487
Website: https://www.centralnews.co.za
Social Media Platforms (@centralnewsza) : Linkedin, Facebook, Tiktok, Twitter, Instagram, Youtube
#centralnewsza #news #politics