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 Professor Bonke Dumisa.
The South African economy had a rough start in 2024, facing challenges from various angles. This year was a crucial National and Provincial Elections Year, with a significant anti-ANC sentiment and the emergence of many highly financed new political parties, most of which collaborated closely with the Democratic Alliance (DA) under the so-called “Moonshot Pact.”
To complicate matters further, former ANC President and former President of South Africa, Jacob Gedleyihlekisa Zuma, appropriated the name of the ANC’s armed wing, Umkhonto Wesizwe, by forming an anti-ANC political party called “Umkhonto Wesizwe.”
The country has been, and still remains, on “junk status” (sub-investment grade) since 29 April 2020, the date by which all three top international credit rating agencies—Standard & Poor’s, Fitch, and Moody’s—had downgraded South Africa.
The nation is heavily in debt, with government debt exceeding R6 trillion. This translates to a GDP-to-debt ratio of over 70%, and the country is spending at least R1 billion per day—an annual debt servicing cost of over R366 billion—just to service the debt, without even starting to repay the principal.
The economy has also been severely impacted by Eskom’s unending load-shedding, which has wreaked havoc on South Africa’s productivity. In 2023, the country recorded a mere 0.6% GDP growth rate, with economic growth in the fourth quarter amounting to just 0.1%. This sluggish growth trend carried over into 2024.
The national budget presented by Finance Minister Enoch Godongwana in February 2024 was balanced and avoided reckless vote-buying. Concerns over the budget being weighed down by the National Health Insurance (NHI) were unfounded.
Eskom, however, implemented no load-shedding from 26 March 2024 onwards, giving the economy over 250 load-shedding-free days. Despite this, the first quarter of 2024 saw a 0.1% GDP contraction, followed by a modest 0.4% growth in the second quarter and another contraction of 0.3% in the third quarter.
Statistics South Africa (StatsSA) attributed the third-quarter contraction mainly to the agricultural sector, which saw a dramatic GDP contraction of over 28%. This was largely due to severe drought and adverse weather conditions—factors beyond the government’s control.
A surprising turn of events followed the general elections of 29 May 2024, where the ANC lost its parliamentary majority, falling to just under 40%. To the surprise of many, the ANC and DA formed a Government of National Unity (GNU), along with the IFP and smaller parties.
This development was welcomed by global markets, which viewed the alliance as a harbinger of political and economic stability. The South African rand has strengthened significantly against major currencies, including the US dollar, the British pound, and the euro, which in turn reduced the cost of importing crude oil and led to several fuel price cuts.
Despite these gains, unemployment remains stubbornly high, with official rates exceeding 30% and the expanded definition—including discouraged job seekers—hovering above 40%.
South Africa’s structural unemployment stems from an education system that fails to produce graduates “fit for purpose” for the country’s economic needs. A complete overhaul of the education system is needed to tackle these challenges effectively.
The government had forecast a 2024 GDP growth rate of 1.1%, but with two contractions already recorded, growth for the year is unlikely to exceed 1%. With a population growth rate of at least 1.33%, economic growth below this level further exacerbates unemployment.
Hopes for 2025 hinge on incremental improvements in economic performance, despite internal tensions within the GNU and external pressures, such as tariff threats from US President-Elect Donald Trump.
Written by Prof. Bonke Dumisa is an independent economic analyst. The views expressed here do not necessarily represent those of The Southern African Times.
