South Africa’s GDP Growth Undermined by Agricultural Slump

AFRICAN BUSINESS AND ECONOMYDecember 4, 2024 at 8:36 AM UTC

TLDR

South Africa’s economy contracted by 0.3% in Q3 2024, driven by a 28.8% decline in the agricultural sector, the deepest slump in over three decades.
This contraction, caused by drought reducing output of key crops like corn, soybeans, and wheat, leaves year-to-date GDP growth at just 0.4%.
Economists at Nedbank and Goldman Sachs cut their 2024 projections to 0.5% and 0.6%, respectively, from 1%.

South Africa’s economy contracted by 0.3% in Q3 2024, driven by a 28.8% decline in the agricultural sector, the deepest slump in over three decades.

This contraction, caused by drought reducing output of key crops like corn, soybeans, and wheat, leaves year-to-date GDP growth at just 0.4%, raising doubts about the National Treasury’s 1.1% 2024 growth forecast.

Economists at Nedbank and Goldman Sachs cut their 2024 projections to 0.5% and 0.6%, respectively, from 1%. Others, including FNB and Bloomberg Economics, signaled likely downward revisions but remain optimistic about Q4 recovery, supported by improved consumer sentiment, lower inflation, and interest rate cuts.

You can follow Daba’s reporting on Africa on WhatsApp. Sign up here

Key Takeaways

The GDP contraction strengthens the case for South Africa’s central bank to deepen its rate-cutting cycle. Annual inflation has stayed below the 4.5% midpoint since August, prompting two rate cuts since September. Analysts predict further reductions, with Goldman Sachs projecting a terminal rate of 6.5%, as policymakers aim to bolster growth amid persistent economic headwinds.

South Africa

Economy

GDP Growth

Agriculture

Nedbank

Goldman Sachs