South Africa’s economy grew by 1.1% in 2025, with GDP having expanded by 0.4% in the fourth quarter.

The fourth quarter marked the fifth consecutive quarter of economic growth for the country, which acting government spokesperson Nomonde Mnukwa says signals continued resilience in the economy despite a challenging global environment.

Yearly economic growth was largely driven by key service-related sectors, including finance, real estate and business services; trade, catering and accommodation; and personal services.

Positive contributions were also recorded in agriculture and general government services.

On the expenditure side, economic expansion was supported by increased household spending, growth in gross fixed capital formation and higher government consumption, which collectively contributed to the positive quarterly outcome.

The 1.1% growth rate in 2025 marked the highest yearly growth rate since 2022 when the economy expanded by 2.1%.

Mnukwa says the reforms that are being implemented through Operation Vulindlela and public-private partnerships are enablers of this sustained growth.

For Nedbank, the outcome was worse than expected, with GDP continuing to reflect the persistent drag from the country’s structural challenges, which were further compounded by high US tariffs and the expiry of the African Growth and Opportunity Act.

Nedbank expects that consumer spending will continue to carry the economy, with consumers benefitting from real income growth, relatively subdued inflation and lower interest rates.

Growth of 1.5% is attainable for this year for the bank, but a key concern remains the conflict in Iran leading to supply shocks globally and higher oil prices, which may stoke inflation.

Similarly, Don Consultancy Group chief economist Chifipa Mhango says the GDP data for the fourth quarter and the full-year points to a “modest but fragile” recovery in economic activity, with growth still being constrained by structural bottlenecks in energy, infrastructure and investment.

While the 1.1% growth rate in 2025 marks an improvement from the subdued growth seen in 2024, the pace remains well below what is required to significantly reduce unemployment and stimulate inclusive economic expansion.

Mhango says Statistics South Africa’s latest dataset reflects an economy that is stabilising but still operating below its potential. He says there are pockets of resilience in the South African economy, particularly in services and household consumption; however, the overall growth trajectory remains subdued.

He continues to explain that much of the growth recorded in the fourth quarter last year was driven by the finance, real estate and business services sector, which expanded by 1.4% and contributed the largest share to GDP growth. The trade sector, including retail and wholesale trade, also showed moderate growth supported by consumer spending.

Overreliance on consumption-driven growth raises sustainability concerns, Mhango warns. “While these sectors are important, sustainable economic development ultimately depends on stronger expansion in productive sectors such as manufacturing, mining beneficiation and infrastructure development.”

These sectors suffer from ongoing structural constraints, with manufacturing having contracted by 0.6% in the fourth quarter, electricity production by 2.2% and construction activity by 1.3%.

Mhango adds that mining output also declined in the quarter, reflecting volatility in commodity production and operational challenges in the sector.

The contraction in these sectors is concerning for the consultancy owing to their importance for employment and industrial development. The production sectors remain the backbone of the economy and lack of growth in these sectors will limit overall economic momentum.

Mhango points out that investment activity was weak in 2025, with overall fixed investment having declined by 2.2% for the year, which signals persistent caution among investors and limited expansion in productive infrastructure.

“Investment is the most critical component required to unlock higher growth. Investment in energy, logistics infrastructure, manufacturing capacity and digital infrastructure will be essential if the economy is to transform from consumption-led growth to productivity-led growth,” Mhango states.

He adds that South Africa’s economic outlook will largely depend on the pace of structural reforms and improvements in infrastructure investment.

NWU Business School Professor Raymond Parsons agrees that faster progress towards government’s target of 3.5% economic growth by 2030 is necessary to meet socioeconomic expectations.

“While the South African economy is more resilient than it was a couple of years ago, the latest growth figures show there is no grounds for complacency about the outlook,” he states.

Parsons believes the domestic outlook is also vulnerable to new global uncertainties, which could stall further GDP growth this year.

AGRICULTURE

South Africa’s agriculture sector was a strong contributor to GDP last year on the back of a 17.4% year-on-year growth. This followed the sector recording two consecutive years of contraction of 4.6% and 8.7% in 2023 and 2024, respectively.

According to FNB, bumper harvests, record exports, and favourable production conditions underpinned this massive feat in the agriculture sector’s growth despite the turbulent trading environment characterised by US “Liberation Day” tariffs and animal disease outbreaks.

On a quarterly basis, however, agriculture contracted by 0.4% quarter-on-quarter, mostly owing to losses in the livestock sector as a result of Foot-and-Mouth Disease (FMD) outbreaks.

The outbreak of the African Swine Fever, in turn, was a double whammy for pigs, causing losses for producers. This was inevitable considering that animal products accounted for the biggest share of 41% of total agriculture gross producer value at R206.87-billion in 2025.

Cattle (beef and dairy), pigs, and sheep collectively accounted for 48% of the total animal product gross producer value in 2025. Nonetheless, with government having declared FMD a national disaster and adopted a mass vaccination policy, these efforts will go a long way in stabilising the livestock industry in the medium term, FNB states. 

Meanwhile, South Africa’s agriculture exports defied the odds with 10% year-on-year growth to a new record of $15.1-billion in 2025. FNB says a combination of higher volumes and higher commodity prices underpinned this good export realisation.

“Seasonal production conditions for the 2025/26 agriculture year appear excellent with a higher planted area under summer crops. This is likely to deliver another good agriculture harvest which bodes well for GDP outcomes in the medium term,” FNB adds.

Nonetheless, the world faces another turbulent year following the outbreak of the war in the Middle East and this poses serious risks to the agriculture sector both from an import and export perspective.

South Africa is a net importer of important agrochemicals such as fertiliser and crude oil for fuel, and the sector might face higher input costs ahead of the winter plantings and summer crop harvesting in two months’ time.

FNB concludes that higher freight costs and the potential closure of the Middle East markets owing to the war may stymie export performance if the situation does not normalise in the medium term.