South Africa in a per capita recession

Citadel chief economist Maarten Ackerman said South Africa is in a per capita recession because the population is growing faster than the country’s struggling economy.

On 5 March 2024, Stats SA released South Africa’s GDP data for the fourth quarter of 2023.

It revealed South Africa’s GDP increased by 0.1% in the fourth quarter of 2023, meaning the economy grew by an estimated 0.6% in 2023.

“Simply put, the economy is growing at around 1%, while the population is growing at around 1.5% to 1.6%,” Ackerman said.

“The economy isn’t producing enough goods and services to keep pace with population growth, and there is a greater need for social support while unemployment keeps increasing.”

Ackerman explained that economic growth was flat in the last quarter of 2023, and South Africa is now sitting at around 1.2% year-on-year real unadjusted GDP growth, while the average real GDP growth for 2023 was only 0.6%. 

“Although this is not officially considered a recession, and some are celebrating it, I believe this is still a very weak economic performance, as we are not outpacing population growth. And this implies that we are in a per capita recession.”

Ackerman said Q4’s data shows the economy has only grown fractionally bigger from before the Covid-19 pandemic in Q1 2020. 

“We’ve seen the economy growing by only about R8 billion in four years, which confirms the view that there was virtually no growth in rand billions over this period,” he said. 

“This speaks to the serious structural issues we are facing in the economy, such as continued load-shedding and dysfunctional rail and logistics systems.”

Stats SA’s data confirmed that agriculture was under severe pressure in the last quarter of 2023 and last year. Other industries that suffered were construction, trade, catering and accommodation. 

While South Africa saw some encouraging growth in mining and manufacturing, it could have been far more substantial if these industries had not had to contend with the country’s challenges.

Household consumption for the last quarter was also essentially flat at a negligible 0.2% increase. 

“This talks to the very tough environment that consumers are facing, given the current high interest rates, high cost of living and high unemployment.”

Ackerman is also concerned about a further decline in gross fixed capital formation (GFCF). 

“This is a very important trend for us to follow as it shows the willingness of companies to invest back into the economy.” 

While South Africa has experienced some positive quarters of GFCF, the last two quarters turned negative again, with quite a deep 3.8% dip in Q3 and another 0.2% decline in Q4. 

This saw GFCF coming in at 4.2% for 2023, which is still rather positive under the current circumstances. However, as a percentage of GDP, it is around 15%. 

“We would like to see it coming in at closer to 25% of GDP to really pave the way for better economic growth going forward,” Ackerman said.