South Africa's GDP growth modestly rises to 0.5% amid industry challenges

South Africa’s economic landscape presents a mixed bag as the latest GDP figures revealed a modest growth of 0.5% for the third quarter of 2025.

While this change might signal hope, the underlying numbers tell a story of cautious optimism amidst notable challenges confronting various sectors.

According to Frank Blackmore, Lead Economist at KPMG, nine out of ten industries displayed positive growth from the second to the third quarter, a positive indicator of a broadly distributed recovery.

The trade industry emerged as the leading contributor, logging a 1% increase and adding 0.1 percentage points to the overall GDP.

Growth in industries such as wholesale and retail trade, motor trade, catering, and accommodation played a significant role in this upswing.

Similarly, the mining sector recorded a noteworthy increase of 2.3%, contributing another 0.1 percentage points, largely fuelled by rising outputs of platinum group metals, manganese ore, and coal.

The finance, real estate, and business services sector also saw a moderate growth rate of 0.3%, further underpinning the GDP with an additional 0.1 percentage points, mainly driven by burgeoning activities in real estate.

However, it was not all good news.

The electricity, gas, and water industry faced troubling times, recording a decline of 2.5% that detracted 0.1 percentage points from the overall economic growth.

This downtrend was chiefly attributed to diminishing electricity production and consumption, highlighting persistent structural challenges within the sector.

The consumer landscape appeared somewhat more optimistic.

Household final consumption expenditure (HFCE) rose by 0.7%, contributing a significant 0.5 percentage points to total growth.

Key spending categories such as transport surged by 1.6%, adding 0.2 percentage points to HFCE and signalling a renewal in consumer activity, although areas such as clothing and footwear were marked by negative trends.

The government sector also reflected a minor uptick with a growth of 0.3%, driven by increased compensation for employees, while gross fixed capital formation saw a rise of 1.6%, positively impacting the aggregate growth by 0.2 percentage points.

The jump was particularly notable in transport equipment, which soared by 6.6%, alongside non-residential buildings, which grew by 2.7%.

Yet, external challenges persisted, as net exports negatively influenced GDP by 0.4 percentage points. While exports of goods and services experienced a mild rise of 0.7%, it was overshadowed by a more drastic 2.2% increase in imports, marking a concerning trend influenced by machinery, electrical equipment, and mineral products.

As South Africa battles these economic hurdles, the immediate focus must shift to effective policy responses aimed at resilience and recovery.

Blackmore emphasised that while some industries exhibit growth, the economy’s overall trajectory remains precarious, with expectations of GDP closing under 1% for the year—even if an optimistic fourth quarter is achieved.

In a bid to enhance the accuracy of financial data and align with international best practices, Stats SA announced plans to update the base year for national accounts to 2022, aiming for the next update to be published in 2026.

BUSINESS REPORT