0.1% growth — is that all?

9 June 2025 — Is 0.1% quarterly GDP growth the most we can expect? How are the numbers looking on fixed investment? What do you need to know about the Mineral Resources Development Bill? What is the latest business confidence reading? Will loadshedding make a return? How stable is uMkhonto weSizwe Party?

0.1% growth — is that all?

Last week’s quarterly gross domestic product (GDP) numbers suggest that the sugar high afforded to South Africa by the formation of the Government of National Unity (GNU) in 2024 has run its course. Statistics South Africa (Stats SA) reports that the economy grew by an anaemic 0.1% in the first quarter, down from 0.4% in the fourth quarter of 2024. Year-on-year, the economy grew by 0.8%. The population expanded by 1.3% over the same period.

Had it not been for the large boost from agricultural production, which expanded by 15.8% on the back of good rains, the economy would have shrunk by 0.3%. The largest drags on overall GDP growth were the mining sector, which contracted by 4.1%, and manufacturing, which contracted by 2%. A draft new mining law, diplomatically described as “not altogether optimal” by the Minerals Council, threatens to further hobble the sector’s growth prospects. We report on that law below.

Economists have been revising their growth forecasts for South Africa downwards, bringing them more in line with the CRA’s expectations of a rate close to 1%. In its June 2025 Economic Survey of South Africa, the OECD forecasts South African GDP growth of 1.3% in 2025, similar to the National Treasury’s current forecast of 1.4%. A group of 26 economists surveyed in the last week of May provided a median forecast of 1.2%. The numbers suggest that the government’s goal of achieving growth above 3% in 2025 is well out of reach.

Fixed investment is down

A key economic data point the CRA tracks is gross fixed capital formation (GFCF) as a percentage of GDP. This refers to investments in fixed assets such as factories, heavy plant, machinery and equipment, roads, transmission lines, rail, ports, and other real assets that are difficult to move out of a country.

Because such assets require greater commitment on the part of the investor, a higher rate of fixed investment reflects investor confidence in a country’s economic prospects. South Africa’s investment rate is around 15% of GDP, far below the 26% global average, and just half of the 30% target the government set itself for 2030.

Last week’s numbers from Stats SA show that fixed investment contracted by 1.7% in Q1 2025, following a 0.5% decline in Q4 2024. The agency noted: “There was a slowdown in economic activity related to residential buildings and construction works. Investments in machinery & other equipment and transport equipment were also weaker.”

Despite efforts by the GNU to talk up the economy, South Africa’s zero-growth reality has not changed. This will remain the case while infrastructure failings are not addressed with sufficient urgency, crime remains a deterrent, and the policy environment remains hostile.

New mining law an “investment killer”

A new draft mining law, the Mineral Resources Development Bill, has been given a frosty reception by the industry. The Minerals Council South Africa said it did not reflect the industry’s inputs, while industry commentators pointed out that it further expanded state control over a sector that is already ranked among the least attractive worldwide, according to the Fraser Institute’s 2023 survey of mining jurisdictions.

The Bill seeks to impose Black Economic Empowerment (BEE) requirements on prospecting, an activity that is inherently highly capital intensive and very uncertain. It also states that any interest in an unlisted company holding a prospecting or mining right may not be sold or transferred without the prior written consent of the mining minister. Ministerial consent will also be required for the transfer of a controlling interest in a listed company holding a mining or prospecting right. Given the time likely to be required to process such applications, these changes will further deter investment.

The Bill will also empower the mining minister to amend or repeal an existing industry charter, including presumably the 2002 mining charter which established the “once empowered, always empowered” principle. In the absence of that principle, mining companies would have to keep doing “top-up” deals to regain required levels of BEE ownership whenever existing BEE shareholders sold out.

Lili Nupen, mining lawyer at NSDV, warned that the Bill, if enacted in its current form, would mean the end of South Africa’s mining industry because the large mining companies would divest out of South Africa while the junior miners would no longer be able to raise capital. Mining analyst Peter Major said the Bill “doesn’t have one redeeming feature to attract any investment, local or foreign”.

The draft legislation is almost certain to be challenged by the mining industry, including in the courts. In the meantime, the uncertainty it creates means South Africa’s mining industry — and the economy more broadly — will lose out on important opportunities in a world hungry for critical minerals. Despite the country’s huge potential to host a world-leading mining industry, and the thousands of jobs that could be provided by mining, this Bill will further diminish an industry which has been in decline for years.

Business confidence droops in Q2

The RMB/BER business confidence index declined by five points in the second quarter, from 45 in Q1 to 40 in Q2, according to a survey conducted in May. This places the index slightly below the long-term average and means that the majority of businesses in South Africa are pessimistic about overall conditions.

Respondents to the survey noted global trade uncertainty amid the Trump administration’s tariff manoeuvres and persisting logistics problems in South Africa among the reasons for their muted outlook. Political uncertainty over the budget, the on-again, off-again VAT increase and the continued participation of the Democratic Alliance in the GNU were given as further reasons.

Risk of loadshedding

With a cold front heralding low temperatures and high electricity demand this week, Eskom has warned that South Africa’s power grid is constrained. According to the utility’s Winter Outlook, no loadshedding will be necessary while unplanned outages remain below 13,000MW. If they rise to 15,000MW there could be Stage 2 loadshedding. During the past week, outages averaged 14,644MW.

While Eskom says that “the power system remains stable and continues to demonstrate resilience”, this illustrates how slim the margins are. In its current state, Eskom would not be able to provide sufficient power for the much higher economic growth rates the country needs.

MK remains unstable

Floyd Shivambu was last week demoted from his position as secretary-general of the uMkhonto weSizwe Party (MK Party) and has been redeployed as an ordinary member of parliament. A major acquisition from the Economic Freedom Fighters (EFF), which he co-founded and led as deputy president alongside Julius Malema, Mr Shivambu was expected to add organisation-building capacities which the very new party, now the third largest in the country, sorely needed. With this latest shuffle, the MK Party faces renewed questions regarding its future viability.

While tensions between Mr Shivambu and Duduzile Zuma, a daughter of the party president, Jacob Zuma, continued to fester from February onwards, it was Mr Shivambu’s visit to the fugitive pastor Shepherd Bushiri in Malawi over the Easter Weekend that was cited as the reason for his demotion.

Whether his demotion is enough of a compromise to keep the party leadership happy remains to be seen. Mr Shivambu may consider the African National Congress (ANC) a more welcoming home, should he decide to leave the MK Party. For that party, Mr Zuma’s having to manage competing interest groups will be a perennial headache, likely to spill over into open conflict when he leaves office.