Market Update: South Africa’s economy grows just 1.1% in 2025, missing expectations – Full Analysis

South Africa’s economy expanded by only 1.1% in 2025, underscoring the country’s ongoing struggle to generate meaningful growth despite modest improvements from the previous year.

Data released by Statistics South Africa (StatsSA) on Tuesday showed that the economy grew slightly faster than the 0.5% recorded in 2024, but the overall performance remained well below the expected 1.4% and the level needed to address high unemployment and rising fiscal pressures.

The data highlights the fragile nature of South Africa’s economic recovery, with growth continuing to rely heavily on consumer spending and services rather than investment and industrial expansion.

With the economy expanding only marginally, stronger reforms and higher levels of investment will be needed to lift growth meaningfully and address the country’s deep-rooted economic challenges.

StatsSA said the annual growth was supported mainly by gains in the finance, real estate and business services sector, which increased by 1.9% and contributed 0.5 percentage points to total GDP growth.

Agriculture, forestry and fishing also delivered a strong performance, expanding by 17.4% and contributing 0.4 percentage points to overall growth. Trade, catering and accommodation activity also helped lift economic output, growing by 2.3% during the year and adding 0.3 percentage points to the total.

However, StatsSA’s chief director for national accounts Bokang Vumbukani-Lepolesa said several key industries recorded contractions, limiting the broader expansion of the economy.

Manufacturing, electricity, gas and water supply, and the construction sector all posted negative growth in 2025, highlighting persistent structural weaknesses in the country’s productive sectors.

“Manufacturing was the largest negative contributor, shrinking by 0.6%. The most significant downward pressure came from the automotive division, wood, paper, and publishing, and food and beverages,” she said.

“Other industries that declined in the fourth quarter included electricity, gas, and water, construction, mining, and transport, storage, and communication.” 

These sectors are widely regarded as critical drivers of job creation and industrial development, making their continued decline a concern for policymakers and investors.

Meanwhile, fourth-quarter data showed that economic momentum remained weak toward the end of the year. Gross domestic product increased by just 0.4% in the fourth quarter of 2025 compared with the previous quarter, following growth of 0.3% in the third quarter.

The finance, real estate and business services sector again led the quarterly expansion, growing by 1.4% and contributing the largest share to GDP growth.

The trade, catering and accommodation sector also posted modest gains, expanding by 0.9% during the quarter, while personal services rose by 0.4%. Government services increased by 0.4%, supported by higher employment levels in provincial and local government.

Agriculture, forestry and fishing also grew by 0.4%, largely due to stronger output in field crops and horticulture.

In contrast, the manufacturing sector continued to struggle, contracting by 0.6% in the fourth quarter.

StatsSA said eight of the 10 manufacturing divisions recorded negative growth, with the largest declines reported in the motor vehicles and transport equipment, wood and paper products, and food and beverage industries.

On the expenditure side of the economy, household consumption remained the primary driver of growth.

Household final consumption expenditure increased by 3.6% during 2025, contributing 2.4 percentage points to the overall expansion in GDP. Spending was supported by stronger demand for food, transport, clothing and footwear, health services and restaurant and hotel activities.

Despite this increase in consumer spending, investment activity weakened significantly. Gross fixed capital formation declined by 2.2% during the year, subtracting 0.3 percentage points from economic growth.

Weak investment levels remain a major constraint on South Africa’s long-term economic prospects, as they limit the expansion of productive capacity and infrastructure.

External trade also weighed on the economy. Net exports reduced overall growth by one percentage point in 2025, as exports declined while imports increased.

Exports of goods and services fell in part due to lower trade in vehicles and transport equipment, vegetable products, and prepared food and beverages.

Meanwhile, imports rose, driven by increased purchases of machinery, electrical equipment, vehicles and agricultural products.

BUSINESS REPORT