South Africans will become poorer in 2025

South Africans are expected to become poorer in 2025 as the country’s economic growth remains below population growth, driven by weak GDP figures, declining investment, and long-term structural challenges.

Stats SA revealed that South Africa’s economy grew marginally by 0.1% in the first quarter of 2025. This follows a growth of just 0.4% in Q4 of 2024, revised down from an initial estimate of 0.6%.

Independent economist Elize Kruger said on Newzroom Afrika that the country’s growth in Q1 2025 is disappointing. “It remains way too low for South Africa’s needs and our socio-economic challenges,” Kruger said.

Although the GDP growth is slightly better than expected, overall, it is a weak number, starting the economy on the back foot in the first quarter.

Fixed investment spending also contracted by 1.7% quarter-on-quarter. That’s very closely correlated to confidence levels.

Additionally, the country’s currency had some difficulties in the first quarter. According to Kruger, the budget debacle also contributed to this very muted GDP number in quarter one.

She said that South Africa needs growth above our population growth. Current expectations for 2025 are around 1% to 1.2% at best, still below population growth.

According to the latest mid-year population estimates, South Africa’s population exceeded 63 million in 2024. The country’s population grew by approximately 835,513 individuals, marking a 1.33% increase from July 2023 to July 2024.

“From that point of view, every citizen in South Africa would most probably become poorer again in 2025, a trend that has been ongoing for some years.”

In fact, according to a report by Investec Wealth & Investment International, South Africans are worse off than they were in 2010.

Investec explained that South Africa’s economy is 37% smaller than it would have been had the country tracked its emerging-market peers and sustained annual growth of 4.5% since 2010.

South Africa losing trillions

Investec calculated that matching those expansion rates would have lifted the country’s nominal gross domestic product to almost R12 trillion last year from R7.5 trillion.

The slow growth partly coincided with an era of endemic government corruption, commonly referred to in South Africa as state capture. This cost the economy at least R500 billion.

“The cumulative figure of revenue foregone is scary,” said Osagyefo Mazwai, investment strategist at Investec Wealth & Investment International.

“That is material, considering the fiscal constraints facing South Africa, which demonstrates the need to ensure economic growth to boost the fiscal war chest and further enable the capacity of the state to deliver services.”

Stronger growth would have also boosted government revenue. The report found that receipts in 2024 alone could have been around R800 billion stronger.

This additional tax revenue would have better positioned the country to tackle critical infrastructure investments, such as electricity transmission, ports, and rail.

Instead, South Africa is grappling with high gross national debt, with the debt-to-GDP ratio expected to peak at 77% this year.

“We need higher growth numbers, and unfortunately, the global environment has turned negative for us,” Kruger said. It’s now very important for the country’s government to focus on local economic policies to stimulate growth.

South Africa cannot look elsewhere globally for support this year, especially with global growth revised downwards and our trading partners under pressure due to the global trade war.

“From that point of view, focusing on our structural reform measures in South Africa is now of pertinent importance,” Kruger added.

Something important to remember is that the first quarter’s numbers preceded the United States’ announcement on punitive import tariffs and the subsequent downward revision to global growth forecasts.

This means the country had an additional headwind since quarter one, and while it is not yet reflected in official data, it has already been incorporated into economists’ forecasts.