South African economic growth (real GDP) dipped into negative territory in the first quarter of 2024 on a quarter-on-quarter basis. Measured on a year-on-year basis, the economy expanded by just 0.5%. StatsSA also reported a 67 000 decline in formal employment in the first quarter. While this data is backward and not forward-looking, it does underscore the main challenge facing the seventh democratic administration. South Africa’s economy is chronically underperforming, with real growth having averaged less than 1% over the past decade, less than annual population growth.
Unemployment remains among the highest in the world, above 30%. A weak economy over the past decade means tax revenues have persistently lagged spending and government borrowed a cumulative R5 trillion to plug recurring annual budget deficits. This in turn placed upward pressure on interest rates, as bond investors worried over government’s creditworthiness and charged it a premium. This contrasts with the usual situation where countries experiencing weak growth see their interest rates declining.