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South Africa’s Economy Poised for Q4 Rebound as Business Confidence Rises

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South Africa’s economy is showing promising signs of a turnaround, with the composite leading business cycle indicator rising for the third consecutive month in November 2024. This increase signals a likely rebound in GDP for the last quarter of the year, following a 0.3% contraction in Q3 2024.

According to the South African Reserve Bank (SARB), the business cycle indicator rose by 0.6% in November, building on a 1.1% gain in October. The uptick reflects positive momentum in key sectors, suggesting that economic recovery is gaining traction.

Key Drivers of Economic Growth

The November business cycle improvement was driven by:

  • New vehicle sales growth: Up 8.1% year-on-year, with 48,585 units sold in November 2024.
  • Higher business confidence: The RMB/BER Business Confidence Index climbed to 45 points in Q4 2024, up from 38 in Q3, reflecting improving sentiment among South African businesses.

The increase in vehicle sales marks the second consecutive month of growth, signaling a possible sustained upward trend in the market, according to the Automotive Business Council.

Meanwhile, business sentiment has steadily improved since hitting a low of 27 points in Q2 2023, indicating that companies are more optimistic about economic conditions heading into 2025.

Challenges and Downside Risks

Despite these positive trends, some factors weighed on growth:

  • Decline in real M1 money supply growth
  • Drop in SA’s US dollar-denominated export commodity price index

Economic analysts warn that global economic weaknesses and a drop in demand for South African exports could pose risks in 2025.

GDP Forecast: Strong Rebound Expected in Q4

Leading economists, including Investec’s chief economist Annabel Bishop, predict a strong GDP rebound of 1.8% in Q4 2024, fueled by:

  • Interest rate cuts, which have boosted consumer spending
  • Higher expenditure, driven by increased retirement savings withdrawals
  • Infrastructure investment, which is expected to strengthen further in 2025

According to Bishop, South Africa’s business cycle is set to improve in the coming year, with rising GDP growth, better infrastructure investment, and stronger consumer spending contributing to economic stability.

What to Expect in 2025

While global economic challenges remain, South Africa’s domestic growth indicators are improving. A combination of business confidence, investment in infrastructure, and monetary policy support is expected to drive the country’s economic recovery.

With interest rate-sensitive sectors like vehicle sales and manufacturing gaining momentum, experts believe that South Africa is on track for a more stable economic outlook in 2025.

Do you think South Africa’s economy is on the path to sustained growth?

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