Africa-Press – South-Africa. South Africa’s economy appears to have grown faster than its population growth rate for the first time in years, as the government’s reform programme begins to bear fruit.
The benefits from this reform programme have also been boosted by international events playing out in the country’s favour, despite it facing sharp criticism from the United States.
Elevated global uncertainty and volatility have sent precious metals prices soaring, particularly gold and platinum, which have significantly improved South Africa’s terms of trade.
In turn, this has strengthened the rand, capitalising on a weaker dollar. This results in lower imported inflation, freeing up disposable income for households.
As a result, for the first time in a decade, it appears that the wind is at South Africa’s back, with local and international factors aligning to benefit the country.
In the third quarter of 2025, South Africa’s GDP grew by 0.5% quarter-on-quarter. This follows a revised increase of 0.9% in the second quarter.
While this seems minimal, over the past year, the country’s economy expanded by 2.1%, with activity increasing for four consecutive quarters. All economic sectors besides electricity and water recorded growth in the quarter.
Crucially, fixed investment in South Africa picked up meaningfully after consecutive quarters of decline, indicating that private businesses are beginning to invest in the country.
This type of investment is crucial as it is the predominant driver of sustained economic growth, as opposed to fragile growth driven by consumer spending.
Stanlib chief economist Kevin Lings said that while this is encouraging, an important reference in evaluating a country’s GDP growth is its population growth.
Over the past decade, South Africa’s economy has, on average, grown at nearly half the rate of population growth. Its average economic growth on an annual basis for the past decade was a mere 0.8%.
However, year-on-year in the third quarter of 2025, South Africa’s economic growth was faster than its population growth. This means the country is no longer suffering from a per-capita recession.
According to Stats SA, the country’s population is growing at around 1.4% annually, meaning that at 2.1% South Africa’s economy is outpacing population growth.
Not enough
Stanlib chief economist Kevin Lings
Despite this good news, Lings cautioned that this rate of economic growth is still not high enough to make a meaningful difference in the lives of South Africans.
While it is almost three times faster than the annual average of the previous decade, it is below the level needed to tackle the country’s myriad challenges.
“Ideally, South Africa’s GDP performance needs to exceed 3% a year on a sustained basis to start to make a difference to employment, lifestyles and investment opportunities,” Lings said.
“While 2.1% year-on-year growth is encouraging, it needs to improve further and remain elevated on a consistent basis.”
South Africa has a very strong job coefficient, meaning that for every unit of economic growth, a relatively high number of jobs are created. The country’s economy creates over 100,000 jobs for every 1% of economic growth.
The challenge for South Africa is that its workforce is growing by around 500,000 to 600,000 every year, meaning that despite this current level of faster growth, the economy still cannot absorb the new entrants to the labour market.
“I think a 1.3% growth rate is still nowhere near enough. We need to really get that growth rate above 3% and heading toward 4%,” Lings said.
“Then, I think, we will be in a position to be adding enough jobs to absorb the number of people entering the labour market.”
“At a growth rate of just over 1%, we are not going to create enough jobs to deal with the growth in the population.”
Lings compared the longer-term trend of the country’s economic growth rate versus population growth to make this point clearly.
Since the beginning of the Covid-19 pandemic, the economy is bigger than it was then, with it expanding by 3.5% in real terms over the past six years.
Over that time, the population has grown by more than 6%. This tells you that the growth in the economy is just not keeping pace with population growth.
Furthermore, Lings is unsure whether the 2.1% year-on-year growth rate seen in the third quarter can be sustained in the long run.
“The 2.1% annual growth rate is certainly encouraging, but unlikely to be a sustained level of growth. In other words, I do not think that is the underlying rate of growth of the South African economy,” Lings said.
Lings explained that the sustainable growth rate for the moment sits somewhere between 1% and 1.5%, with it being limited by deteriorating infrastructure and weak business confidence.
“Clearly, we have got a lot of work to do to move it beyond that, which is very much achievable. For the moment, we are stuck in a range of 1% to 1.5%,” he said.
Source: dailyinvestor
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