Budget 2024: Treasury lowers SA’s growth forecast but sees recovery ahead

Treasury yesterday revised South Africa’s 2023 gross domestic product growth estimate down to 0.6%, from 0.8% projected in November. File photo

Treasury yesterday revised South Africa’s 2023 gross domestic product growth estimate down to 0.6%, from 0.8% projected in November. File photo

Published Feb 22, 2024


The National Treasury is betting on a projected decline in consumer inflation and ramped-up investments in renewable energy projects to lift South Africa’s dwindling economic growth out of more than a decade-long downward spiral.

Treasury yesterday revised South Africa’s 2023 gross domestic product (GDP) growth estimate down to 0.6%, from 0.8% projected in November, due to widespread power cuts, operational and maintenance failures in freight rail and at ports, and high cost of living.

According to the 2024 Budget Review, headline inflation is projected to moderate from 6% in 2023 to 4.9% in 2024, and towards a touch of the midpoint target range at 4.6% in 2025 as food and fuel inflation continue to decline.

However, the annual consumer inflation crept up in January, rising to 5.3% from 5.1% year-on-year in December, after two consecutive months of declines.

Tabling his Budget speech in Parliament yesterday, Finance Minister Enoch Godongwana yesterday said power cuts and operational problems in freight rail and ports continued to disrupt economic activity and limit the country’s export potential.

“Despite the improved global outlook for 2024, South Africa’s near-term growth remains hamstrung by lower commodity prices and structural constraints,” Godongwana said.

“The revision is due to weaker-than-expected outcomes in the third quarter of 2023, particularly in household consumption and fixed investment.”

In the third quarter of 2023, GDP growth slumped by 0.2% as a result of intensified power cuts.

South Africa has experienced over a decade of weak economic growth, with GDP growth averaging only 0.8% annually since 2012, entrenching high levels of unemployment and poverty.

The unemployment rate in South Africa edged back to 32.1% in the fourth quarter of 2023 as 7.9 million people remained jobless after community and social services, construction, agriculture, trade and manufacturing industries lost more than 49 000 jobs.

However, Godongwana said the economic growth outlook had improved marginally, with average growth of 1.6% forecast over the next three years, compared with 1.4% at the time of the 2023 Medium-Term Budget Policy Statement (MTBPS).

He said the outlook was supported by an expected recovery in household spending as inflation declines, and an increase in energy‐related fixed investments.

“The growth outlook is supported by the expected easing of power cuts as new energy projects begin production, and as lower inflation supports household consumption and credit extension,” he said.

“But, there are also risks to the domestic outlook. These include persistent constraints in electricity supply, freight rail and ports; and a high sovereign credit risk. Our challenge is that the size of the pie is not growing fast enough to meet our developmental needs.”

Godongwana said long‐term growth was highly dependent on improving capacity in energy, freight rail and ports, and on continuing to reduce structural barriers to economic activity.

He said South Africa’s economic prospects were highly dependent on well‐functioning network industries.

As a result, Treasury has embarked on implementing structural reforms in areas such as logistics, energy, water and telecommunications, with road maps and public-private partnerships companies approved by Cabinet

“We have embarked on a broad structural reform agenda that aims to address the challenges that have held back our growth. This agenda has included areas like electricity, logistics, water, telecommunications and visa reforms,” Godongwana said.

“The Budget Review details the good progress that has been made in these areas over the past few years. But, obstacles remain.”

Meanwhile, Godongwana said the global growth was forecast to increase from 3.1% this year to 3.2% in 2025 due to growth in the US and several large emerging economies.

However, there are downside risks from potential spikes in the global oil price, if the conflict in the Middle East escalates and if growth falters in China – the country’s largest trade partner.