THE HOUSEHOLD SECTOR ECONOMY

4th Quarter 2025 GDP – completes the weak-albeit
improved 2025 picture, reflecting an economy not yet
gearing itself up for serious long-term growth.

Real GDP (Gross Domestic Product) showed a mild improvement in
2025, compared with 2024. But another year of weak capital
expenditure and heavy dependence on consumption spending still
doesn’t seriously address the country’s long-term growth
limitations.
THE KEY NUMBERS
Fourth quarter GDP came in at a 0.37% quarter-on-quarter seasonally-adjusted
growth rate, slightly stronger than the previous quarter’s 0.3%.
This completes the picture for 2025, which was a year of mildly improved
growth of 1.1% for the year as a whole, compared with 0.5% in 2024.
Real Gross Domestic Product (GDP) Growth

Viewing the “production side”, i.e., Gross Value Added (GVA) by industry, for
The 4th quarter of 2025, the Finance, Real Estate, and Business Services Sector
was the key “outperformer”, recording 1.4% quarter-on-quarter growth,
followed by the Wholesale and Retail Trade, Catering and Accommodation
The sector with 0.9% growth on a seasonally-adjusted basis.
On the weak side, the Electricity, Gas, and Water Sector contracted by -2.2%
quarter-on-quarter, and the Construction Sector by -1.3%. Also in contraction
in the 4th quarter were Manufacturing (-0.6%), Mining and Quarrying (-0.6%),
and Transport, Storage and Communication (-0.3%).
An economy still heavily dependent on consumption
Viewing the expenditure side of GDP for the 4th quarter of 2025, consumption
Expenditure was the key driver of GDP growth. Real household consumption
Expenditure grew on a quarter-on-quarter seasonally-adjusted basis by 1.2%
(and a solid 3.6% for the year), while government consumption expenditure
grew by 0.5%
Exports perhaps understandably finished the year in the doldrums, with a -0.6% quarterly decline, battling the year out in a global environment of
increased protectionism.
However, perhaps most of concern was another year of very weak gross fixed
investment (capital expenditure/formation). If South Africa is to make great
improvements to its long-term economic growth, this category of expenditure
needs to be far stronger over a sustained long period.
In the 4th quarter of 2025, real gross fixed capital formation recorded a positive
growth of 1.3% quarter-on-quarter, the 2nd consecutive quarter of positive
growth.
However, for the year 2025 as a whole, it recorded a -2.2% decline, the 2nd
consecutive years of decline.
This expenditure category remains very low by historic standards when
expressed as a percentage of GDP.
If the country is to lift its long-term growth rate meaningfully, there needs to be
be a shift to a lower level of consumption by households and by the government
as a percentage of GDP, and a significantly higher gross fixed investment rate
as a percentage of GDP, funded by a substantially higher savings rate.
The graph below shows that, at 13.55% of GDP, gross fixed investment remains
very low by multi-decade historical standards, having exceeded 30% at a stage
of the 1970s.

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Gross fixed capital formation (% of GDP)
OUTLOOK AND COMMENTS
Gross domestic savings (% of GDP)
Reductions in interest rates since September 2024 are likely to explain much
of the mild acceleration in GDP growth in 2025.
But in terms not only of another mediocre annual growth rate in 2025 (albeit
slightly improved), but also in terms of the composition of expenditure on GDP,
The year was a disappointing one, the economy remaining heavily driven by
consumption spending as opposed to capital investment, which is not likely to
Solve the country’s longer-term growth capability limitations.
Early in the year, I had penciled in an improved 1.6% GDP growth rate for 2026,
based on an expected lag time for the full impact of last year’s interest rate
cuts to feed through to the economy, along with a global growth assumption
In 2026, that was unchanged from 2025. In addition, the thinking has been
that we could see one more 25 basis point interest rate cut later in 2026,
assuming CPI inflation remains “under control” not far above 3%.
Given the recent onset of the conflict in the Middle East around Iran, with
resultant oil supply disruptions and an oil price increase, the assumption of a
Better growth year in 2026 appears hazardous at present. However, I believe
that if the Middle East situation resolves itself quickly (admittedly, the outcome
In that region, which is not easily predictable, we could still be on track for a better
growth in 2026.
Noteworthy have been the utterances by President Trump yesterday, hinting
that the war may be nearing completion. In addition, statements have been
made to the effect that protection is to be provided for oil tankers travelling
through the Strait of Hormuz, while G7 countries have indicated that they may
be releasing oil reserves to ease the supply shortage. The result has been a
significant decline in oil prices since a spike early yesterday morning.
However, the Middle East situation remains volatile and difficult to predict,
and a forecast for further strengthening in growth in 2026 relies heavily on the
The oil supply situation is easing, and oil prices will decline back to pre-war levels soon.