South African Consumers Facing Economic Headwinds Amid Modest Growth

Maarten Ackerman, Citadel's Chief Economist, has urged South Africans to brace themselves for difficult economic times as the nation continues to struggle with tepid economic growth. Ackerman's comments were in response to the latest data released by Statistics South Africa (Stats SA), indicating a 0.6% economic growth in the country in Q2 2023.

Despite the fact that this growth figure exceeded anticipations, Ackerman noted it was only a marginal improvement over the GDP number from mid-2022. He mentioned, "While the country's economy stood at R1.161 billion in the third quarter of last year, it is now at R1.160 billion. The South African growth story has been a tale of stagnation since the pre-Covid era, primarily due to structural constraints."

One of the pressing structural issues, according to Ackerman, is the persistent power cuts besetting the country. He said that without infrastructure revitalization, the South African economy would struggle to grow. The economist expressed dismay over the continuing problems in the construction sector due to load shedding since it is a significant job creation field.

Further, flat consumer spending data also reflects the pressure South African consumers are under. Ackerman highlighted a 0.3% decline in household spending in the past financial quarter. Although there was a visible spending increase in services such as restaurants and hotels, purchases of durable, semi-durable, and non-durable goods dropped.

Ackerman predicts the economic conditions will toughen further over the next 12 to 18 months, with growth rates dropping to just 1.5% or 1.16% in 2023. He concluded, "Global financial stress, sustained load shedding, and increased job market strain will likely pose more difficulty for consumers."