Slow growth in Q1 2025

South Africa’s economy expanded by a marginal 0.1% in Q1 2025, outpacing consensus expectations of flat growth. Year-on-year growth stood at 0.8%, versus forecasts of 0.7%. Agriculture, transport and finance were the primary growth engines, with agriculture surging 15.8%; finance rose 0.2%; and transport, storage and communication grew 2.4%. However, manufacturing (–2.0%) and mining (drag from platinum group metals) weighed on overall performance. On the expenditure side, household consumption, inventories and exports supported a 0.1% expansion, while gross fixed capital formation fell by 1.7%, reflecting weaker residential and machinery investment. Persistent structural constraints, including logistics bottlenecks and high unemployment, underscore the fragility of this expansion. 

With global headwinds such as slowing trade growth and potential US tariffs, OECD projections for G20 growth have been downgraded. Domestically, the recent passage of a contested budget has provided short-term relief for investor confidence, but underlying policy and infrastructural challenges must be addressed to sustain growth. In its May 2025 interim outlook, the OECD trimmed 2025 GDP forecasts for G20 economies including South Africa, citing intensifying trade tensions and slowing global demand. South Africa’s performance is set against slower growth in major trading partners. In addition, lower commodity prices and reduced foreign direct investment may constrain regional demand for South African exports. With only four of ten production industries expanding and muted fixed investment, any further shock such as renewed load‐shedding or global demand slump could tip growth negative.

The marginal expansion (0.1% quarter-on-quarter and 0.8% year-on-year) underscores the economy’s vulnerability to domestic structural weaknesses - logistics bottlenecks, energy constraints and low fixed-investment growth. Accelerating structural reforms, enhancing public-private collaboration, and fostering a more conducive environment for manufacturing and mining will be essential if South Africa is to break out of its sub-1% growth path. As the IMF and OECD have highlighted, without decisive policy intervention, particularly in infrastructure reform, power-sector stabilisation, and logistics efficiency, the country risks stalling or slipping back into contraction.