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  • Writer's pictureDr Roelof Botha

On Balance - Economic Update May

Historic election outcome

Thirty years after South Africa grabbed international headlines with a peaceful transition to a free enterprise democracy, the country's national elections have made headlines again – primarily for good reasons. The ANC's monopoly over socio-economic policy has been broken, and around three-quarters of the votes were garnered by parties that remain committed to a constitution that the rest of the democratic world has acclaimed – it is, after all, premised on the United Nations Declaration on Human Rights.

South Africa has now joined the large international club of countries governed via coalitions or other forms of cooperation between several political parties, which is an indication of a maturing democracy. Although the ANC has been roundly punished at the ballot box due to many years of state capture, corruption, and incompetence at several key state-owned enterprises, it remains the largest party, securing 40% of the vote.

The Democratic Alliance, the second-largest party with 22% of the vote, is expected to play a key role in the imminent formation of a government of national unity (GNU). The country now awaits more details on a proposal by the ANC to form such a cooperative arrangement. Even though the third and fourth largest political parties both share populist views, this should not be of concern for the preservation of socio-economic freedom. Clearly, the two largest political parties have more than sufficient support to form a GNU. Both are committed to maintaining the Constitution and the principle of private property rights.

The downside

Judging by the dip in the Absa Purchasing Managers' Index (PMI) to below the neutral mark of 50, May was characterised by lethargy in the manufacturing sector, most probably due to uncertainty over the outcome of the national elections. Several other indicators of economic activity also struggled to build momentum during the year's second quarter, with the record-high interest rates continuing to take their toll on private consumption expenditure. Despite some progress with the (overdue) involvement of the private sector in fixing the multitude of problems being experienced with the country's logistics infrastructure, South Africa's harbours remain amongst the worst in the world – as confirmed by the latest World Bank rankings for the efficiency of global harbours.

The upside

New upward trend in home prices

Signs have emerged that point to an imminent new growth phase in residential property market activity, with a return to real year-on-year increases in home prices. During April and May, average home purchase prices increased by 7.6% for all buyers, compared to the 2nd quarter of 2023 and by 6.9% for first-time buyers. Inflation is currently just above 5%, translating into a decent actual price increase and providing evidence of an uptick in home demand.

The quarter-on-quarter nominal increase in average home prices for all buyers of 3.3% has been matched by the figure for first-time buyers and is double the average q-o-q home price increase recorded over the past 17 quarters. A further recovery of the demand for residential property is on the cards when interest rates start declining again, possibly during the 2nd half of the year.

APS Africa

South Africa shines in key tourism indicators.

Apart from the achievement of another month without load-shedding, South Africans would have been proud of the country's standing in a critical international index on tourism. South Africa fared exceptionally well in the latest annual global rankings for the popularity of hosting conferences, published in May by the International Congress and Convention Association (ICCA). For countries, South Africa was ranked no. 41 out of 180 countries that hosted at least one meeting. For cities, Cape Town was ranked no. Sixty-three out of more than 1,200 cities, placing the mother city within the top 6% in the world. Cape Town was a more popular convention venue than cities such as Rio de Janeiro, Washington, Miami, Los Angeles, New Delhi, Frankfurt, and Las Vegas.

Marginal GDP growth secured in 1st quarter.

According to Statistics SA, the country's GDP's year-on-year real growth rate amounted to 0.5% in the first quarter of 2024. The economy has grown at real positive rates for eleven of the past twelve quarters, despite the lingering aftereffects of the COVID-19 pandemic, weak prices for several key export commodities, and, since 2022, the restrictive monetary policy stance of the SA Reserve Bank's Monetary Policy Committee.

APS Africa

(The graph is based on four-quarter averages to eliminate seasonal influences).

The economy's largest sector, which encompasses financial & business services and real estate, managed to record a nifty year-on-year real growth rate of 2.4% in the 1st quarter. Together with personal services, which embody many small entrepreneurial businesses, these two sectors have consistently expanded their share of GDP. In the 4th quarter of 2018, their combined share of GDP at basic prices (value added) was below 40% but reached almost 46% during the second quarter of 2024.


Dr Roelof Botha

On Balance by Dr Roelof Botha deliberately emphasises positive news that, more often than not, confirms the resilience of the South African economy and the immense scope for new business opportunities.



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