SA Economy Grows by 0.1% in Q1 2025 as Agriculture Leads Recovery

 South Africa’s economy grew marginally by 0.1% in the first quarter of 2025, a slight uptick from the previous quarter’s 0.4% expansion, according to the latest data released by Statistics South Africa (Stats SA). While the growth remains sluggish, it represents a continued recovery from the devastating impact of the COVID-19 pandemic, which saw GDP plunge to R954 billion in Q2 2020. By Q1 2025, GDP had recovered to R1.17 trillion in real terms.

Though modest, the latest figures demonstrate resilience in certain key sectors, despite ongoing structural and global challenges.

Agriculture Surges as Key Growth Driver

The agriculture, forestry and fishing industry emerged as the standout performer during the quarter, recording an impressive 15.8% growth, contributing 0.4 percentage points to overall GDP growth. Stats SA attributed this to heightened economic activity in horticulture and animal products, reflecting a strong agricultural season.

This sector’s robust performance helped soften the blow from declines in heavy industries like mining and manufacturing, which have historically been central to the South African economy.

Transport and Communication Also Show Gains

The transport, storage and communication sector posted a 2.4% increase, contributing 0.2 percentage points to GDP. Growth was mainly supported by rising activity in land and air transport, as well as transport support services, which could be attributed to post-pandemic logistics normalization and rising mobility across the country.

Similarly, the finance, real estate, and business services sector—South Africa’s largest—grew by 0.2%, contributing 0.1 percentage points to GDP. Growth in this sector was linked to improved performance in insurance, pension funding, and auxiliary business activities.

The trade, catering and accommodation industry also rose by 0.5%, driven by stronger retail trade, motor trade, and rising demand in accommodation and food services, likely supported by increased domestic travel and leisure spending.

Manufacturing and Mining Contract Sharply

While several sectors posted gains, the manufacturing industry contracted by 2.0%, with seven out of ten divisions reporting negative growth. Notably, steep declines were recorded in the production of petroleum, chemicals, rubber, and plastic products, along with food, beverages, and motor vehicles and parts.

The mining and quarrying sector also suffered a significant decline of 4.1%, contributing -0.2 percentage points to GDP. This downturn was largely driven by reduced output in platinum group metals, which are key South African export commodities.

Consumer Spending Rebounds, Government Spending Declines

On the expenditure side, household final consumption expenditure (HFCE) increased by 0.4%, contributing 0.3 percentage points to GDP. Positive contributors included:

• Transport spending (up 1.1%), contributing 0.2 points

• Food and non-alcoholic beverages (up 0.5%)

• Restaurants and hotels (up 1.4%)

• Health (up 0.8%)

• Other goods and services (up 0.6%)

However, some segments of consumption saw declines, notably in recreation and culture, communication, and utilities. The reduction in spending on housing, electricity, gas and other fuels may reflect both high inflation and constrained disposable income among households.

Meanwhile, general government final consumption dipped by 0.1%, mainly due to reductions in employee compensation and purchases of goods and services, indicating ongoing efforts to curtail public sector spending.

Investment Slips as Fixed Capital Formation Declines

One of the most concerning elements of the report was the 1.7% decrease in gross fixed capital formation, which subtracts 0.2 percentage points from overall GDP. This contraction reflects waning investment confidence and slowed infrastructure development. Notable declines were recorded in:

• Residential buildings (-5.8%)

• Machinery and equipment (-1.4%)

• Construction works (-2.8%)

• Transport equipment (-3.1%)

This trend suggests that private sector and public infrastructure investment remain suppressed, potentially hampering long-term growth prospects.

Trade Sector Sees Mixed Outcomes

External trade also showed mixed performance. Exports of goods and services rose by 1.0%, driven by increased trade in vegetable products, vehicles and transport equipment, and mineral products. However, imports outpaced exports, increasing by 2.0%, particularly in chemicals, mineral products, and machinery and electrical equipment.

As a result, net exports contributed -0.3 percentage points to overall GDP, indicating a negative trade balance for the quarter.

Economic Outlook

Despite the modest Q1 figures, the data suggests South Africa remains on a fragile path to recovery. Structural reforms, stronger investment, and sectoral diversification are increasingly seen as essential to sustaining growth beyond the rebound from the pandemic.

Key headwinds include persistent load shedding, high unemployment, inflationary pressures, and global economic uncertainty—all of which continue to weigh heavily on investor and consumer sentiment.

With continued momentum in agriculture and select services, there remains cautious optimism. However, declines in critical sectors such as manufacturing, mining, and fixed capital investment underscore the challenges facing the broader economy.