Nedbank sees South African growth at 1% in 2024

Despite increased private sector investment in the economy, primarily in the form of alternative energy sources, South Africa’s economy will fail to grow more than 1% in 2024 due to its structural economic challenges.

This is feedback from a senior economist at Nedbank, Johannes Khosa, who outlined the bank’s expectations for South Africa in its Guide to the Economy for January 2024.

Khosa said the local economy most likely grew a paltry 0.2% in the fourth quarter of 2023, helped by less disruptive load-shedding and higher tourist arrivals.

This is simply not good enough for South Africa and is well below its population growth, meaning that South Africans are getting poorer over time.

Underlying trading conditions, despite improved electricity supply, “remain highly unfavourable, and the economy still faces significant headwinds in 2024”, Khosa said.

South Africa’s moderate growth may even result in an increase in unemployment in 2024, reducing the chances of an increase in consumer spending – further weakening the economy.

Nedbank expects private sector investment to be propped up by continued spending on renewable energy and backup generation.

This will not be at sufficient levels to overcome the country’s structural challenges, of which the logistics crisis is now taking centre stage.

Worryingly, the weakness of the economy has become more broad-based as ky producers reduced output substantially and drew down their inventories to sustain exports.

The spreading weakness is shown in the table below, which outlines the growth rate of South Africa’s various economic sectors.

Nedbank’s forecast for South Africa’s economic growth is broadly in line with those of the International Monetary Fund and the Reserve Bank.

The local economy will likely grow a meagre 1% this year, significantly slower than the IMF’s forecast in October, when it saw South Africa’s GDP expanding by 1.8%, the IMF said earlier this week.

“That’s due chiefly to all of the disruptions we’ve seen in the energy sector, and also the logistics – in transportation, freight and ports in South Africa,” IMF chief economist Pierre-Olivier Gourinchas said.

Gourinchas was also cautious about South Africa’s frail fiscal position and elevated public debt levels.

The South African Reserve Bank (SARB), on the other hand, expects the local economy to grow a meagre 1.2% in 2024 and 1.3% in 2025.

It revised down the GDP growth it thinks South Africa experienced in 2023 to 0.6% from the 0.8% it expected at its previous meeting in November.

The Reserve Bank said the deterioration in the performance of its ports and rail has seriously constrained the local economy.

Transnet’s failures and lengthy periods of load-shedding contributed to weak economic growth in 2023 and higher inflation throughout the year.

“These constraints are expected to persist, severely limiting the potential growth of the economy,” the MPC statement read.