Warning Signs: S&P Slashes South Africa’s 2025 Growth Forecast as Economy Stalls

Disappointing data, faltering industries, and global uncertainty weigh on South Africa’s economic prospects for 2025.

0.1% Growth Sparks Concern

South Africa may have technically avoided recession in early 2025, but the economy is hardly breathing easy. After posting a meagre 0.1% GDP growth in the first quarter, S&P Global Ratings has trimmed its 2025 growth forecast from 1.3% to 1.1%, citing weaker-than-expected economic activity and continued structural challenges.

S&P’s downgrade follows Stats SA’s confirmation that six of the country’s ten major production sectors shrank over the quarter. Particularly hard-hit were mining and manufacturing, with load shedding and global commodity demand playing spoiler.

Load Shedding Returns, Industry Falters

Just as many South Africans were settling into a surprisingly blackout-free routine, load shedding made an unwelcome return after a 310-day break. The effect was immediate: the electricity, gas, and water sector shrank by 2.6%, its worst showing since 2022.

Mining dropped by 4.1%, dragged down by falling output in platinum group metals, gold, copper, and coal. And while diamonds, manganese, and iron ore showed signs of life, it wasn’t enough to offset the broader decline.

Manufacturing also stalled, with notable slowdowns in petroleum and chemical production, food processing, and motor vehicles , all vital parts of the country’s export and employment base.

S&P: Muted Growth Likely to Linger

According to Elijah Oliveros-Rosen, S&P’s chief economist for emerging markets, the fading boost from last year’s agricultural rebound and retirement reform has left the economy exposed.

“We revised our 2025 GDP growth projection for South Africa to 1.1%, down from 1.3%, due to weaker-than-expected first-quarter activity,” he said.

The Two-Pot retirement system, which was expected to spur consumption, hasn’t delivered the spark many hoped for. And with global uncertainties, including oil price volatility, US tariffs, and slowing demand from China, there’s little cushion ahead.

A Government Still Betting on Reform

Responding to questions in the National Council of Provinces this week, President Cyril Ramaphosa acknowledged the crisis.

“We must grow the economy faster to tackle unemployment. That’s why we’re pushing ahead with structural reforms through Operation Vulindlela,” he said.

The Operation, launched as a joint project by the Presidency and National Treasury, aims to cut red tape and fix network industries like electricity, water, transport, and digital infrastructure. But many economists  and South Africans, are asking if progress is fast or broad enough.

Anchor Capital’s Casey Sprake echoed those concerns, saying reforms under the second phase of Operation Vulindlela “must urgently gain traction” to lift the country out of stagnation.

Not All Emerging Markets Are Slowing

While South Africa’s prospects have dimmed, S&P raised its growth expectations for many other emerging markets, including Argentina, Brazil, and Peru, where early 2025 performance exceeded expectations.

For emerging markets excluding China, 2025 growth is now projected at 4.2% nearly four times higher than South Africa’s new outlook.

This contrast further highlights the urgency for South Africa to act decisively. Without quicker reform implementation and better business confidence, the country risks falling even further behind.

What’s at Stake for Ordinary South Africans

Behind the percentages and projections are real livee, young people hunting for jobs, businesses postponing expansion, and households trying to stretch shrinking budgets.

Unemployment remains a stubborn blight on the economy, and without significant momentum, that won’t change. As structural bottlenecks persist, the promise of inclusive, job-rich growth seems increasingly elusive.

South Africa’s economy is not in freefall, but it is drifting. While S&P’s 1.1% growth forecast signals stagnation rather than collapse, it should still ring alarm bells. The time for pilot programmes and slow rollouts is over. If 2025 is to be anything more than a waiting game, Operation Vulindlela and other reforms must shift from promises to measurable impact.

As the global stage grows more competitive and volatile, the real question is: will South Africa catch up, or get left behind?

{Source: IOL}

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