South Africa - Labor market resilience, improved consumer confidence, and continued fiscal expansion will limit the slowdown in consumer spending

MNCs should plan for muted demand growth at least until the May 2024 election

Firms should ensure goals reflect muted economic growth prospects and prepare for financial and operational risks caused by worsening rand volatility and load shedding. Price sensitivity among both public and private sector customers will persist, which may require expanding offerings of low-priced products as customers trade down or delay nonessential purchases. Capturing market share will help achieve commercial goals, especially when commercial sentiment softens ahead of the May 2024 election. This will necessitate focusing sales and marketing resources on resilient industries and customer segments such financial services and high-income households.


  • GDP grew by 1.4% YOY in Q2, beating expectations and representing an improvement on the 0.1% YOY contraction registered in the previous quarter.
  • The uptick was led by an improvement in gross domestic investment (from +6.6% YOY in Q1 to +10.3% YOY in Q2) and government spending (+0.5% YOY to +2.5% YOY). However, consumer spending was unchanged (+0.7% YOY), and slowdown in growth occurred for exports (from +3.8% YOY to +3.5% YOY) and imports (+9.1% YOY to +7.5% YOY)
  • Sectoral performance differed greatly. Growth was led by agriculture (+17.9% YOY), construction (+4.2% YOY), transport and ICT (+3.6% YOY), and manufacturing (+3.6% YOY). In contrast, stagnation in personal services including healthcare (+0.1% YOY), and contractions in retail and wholesale trade, and hospitality (-0.8% YOY) and utilities including electricity (-6.6%) were recorded.

Our View

South Africa will likely avoid recession in 2023, because Q2 performance was stronger than expected. FrontierView’s current growth forecast of 0.1% YOY for 2023 will likely be revised slightly upward, but this latest data release does not fundamentally change the subdued growth outlook. Elevated interest rates—which are at a 14-year high—will cause credit to the private sector to slump and raise public sector debt servicing costs, curtailing government spending and investment. Looking to 2024, the economy will muster a slight improvement in growth to expand 1.3% YOY. A modest fall in interest rates, an improvement in global economic growth, and healthier tourist arrivals will aid growth. However, worsening load shedding (rolling power blackouts) will hobble industrial and service activity, and consumer anxiety and rand volatility will mount ahead of the May 2024 election.

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