South Africa's economy faces turbulence in months ahead after surging to 2-year high

South Africa’s economy gained momentum in the second quarter of 2025 as it delivered its strongest growth in two years, largely driven by strong production side, household consumption and softer imports.

Data from Statistics South Africa (Stats SA) on Tuesday showed that real gross domestic product (GDP) expanded by 0.8% between April and June following a marginal increase of 0.1% in the first quarter.

Stats SA’s chief director for national accounts, Dr Bokang Vumbukani-Lepolesa, said eight out of 10 industries registered growth, with manufacturing contributing the most, followed by mining and trade. 

Vumbukani-Lepolesa said the agriculture, forestry, and fishing sector saw a 2.5% rise during the period, thanks to stronger activity in both horticulture and animal products. 

“After two consecutive quarters of decline, manufacturing and mining turned positive. Manufacturing production expanded by 1.8%, driven mainly by the automotive and petroleum, chemicals, rubber, and plastics divisions,” she said.

“Mining output grew by 3.7%, the fastest pace since the first quarter of 2021. Platinum group metals, gold and chromium ore were the main positive contributors.”

This second quarter GDP print has given optimism amongst investors that economic growth for the year 2025 could surprise more than expected on the upside.

However, others have warned that business confidence is waning under the weight of US tariffs and that the momentum in growth will likely be dampened due to US tariffs.

“South Africa is showing resilience in its industrial and resource sectors. This is a signal that domestic production is picking up, and sectors like mining and manufacturing are finally translating capacity into real economic growth,” said Mark Phillips, head of portfolio management and analytics at PPS Investments.

“While GDP growth is encouraging, the trajectory is fragile. Trade barriers imposed by major economies could slow the momentum, particularly for export-reliant sectors like automotive and agriculture.”

On the expenditure side, Stats SA said stronger household consumption and government spending helped sustain positive momentum. However, fixed investment declined by 1.4%, while net exports dragged on growth as exports dropped 3.1% and imports fell by only 2.1%.

FNB senior economist, Thanda Sithole, said they were maintaining their 1.0% growth forecast for 2025, arising gradually to 1.4% in 2026 and 1.9% in 2027.

Sithole said while US tariffs and trade uncertainty weigh on projections, growth is supported by a benign domestic inflation environment, cumulative interest rate cuts with further reductions expected from late 2026, and ongoing structural reforms in network industries.

“Sectoral dynamics are also providing resilience as automotive sales remain strong, supported by lower borrowing costs and rising demand for entry-level brands; agriculture is benefitting from favourable weather and increased machinery investment; and mining and manufacturing is showing early signs of recovery,” she said.

“Retail trade continues to expand, reflecting improving consumer fundamentals and wage growth outpacing inflation.”

On a yearly basis, the GDP expanded by 0.6% in the second quarter, down from a 0.8% growth in the previous three-month period. Considering the first half of the year, the South African economy advanced by 0.7%.

North West University Business School economist, Prof Raymond Parsons, said the latest GDP figures confirmed that the “incipient economic recovery” has accelerated and widened in the second quarter by involving several more sectors in supporting economic growth.

Parsons said the challenge now was getting the economy up to the Government of National Unity’s growth target of 3% in the medium term, even though GDP growth was still expected to be only about 1% for 2025 as a whole.

“As high frequency data in the third quarter of 2025 still seems mixed, there remain potential vulnerabilities in the present economic outlook. One worrying factor is that exports already showed a negative trend in 2Q 2025, at a time of pending further global uncertainty,” Parsons said.

The government welcomed the latest economic figures, saying the positive uptick in the country’s GDP was reflecting a broad-based recovery across key sectors of the economy. 

“Amid challenging global economic conditions, these figures demonstrate the resilience of South Africa’s economy. The government views this as a positive sign of the impact of ongoing initiatives to stimulate growth, support local industries, and create jobs,” it said.

Meanwhile, the JSE index advanced 0.7% to surpass the 103 500 threshold, setting a fresh all-time high and extending its winning run to three sessions.