In the first quarter of 2023, the country's economy experienced modest growth of 0.4%, with eight out of ten sectors contributing to this growth. According to the International Monetary Fund (IMF), South Africa’s GDP is expected to decline from 2.6% in 2022, to 0.1% in 2023. Although the economy is not yet in a recession, South Africa’s overall economic performance is stagnant and remains grim.
The ongoing geopolitical conflict between Russia and Ukraine, and oil sanctions against Russia impact negatively on South Africa’s economy. The frequent rolling blackouts continue to hinder economic growth prospects and limits economic activity. According to the South African Reserve Bank’s governor, loadshedding alone is estimated to deduct 2 percentage points from economic growth this year.
Adding to these challenges are the burdens of high public debt, a surge in interest rates, and price hikes. The sale of fast-moving consumer goods has seen a notable revenue increase of 13.4% compared to the previous year, driven primarily through price increases and not organic consumption growth. As a result, the recovery process is stalling, and proving inadequate in effectively stabilising the economy, leaving a sombre outlook for the nation's economic prospects.
In recent years, economies around the world have experienced disruptions and structural changes leading to a decline in economic growth. This has impacted Durban’s economy over the years resulting in a stagnant growth outlook as evidenced by the 0.5% growth recorded in the first quarter of 2023. Additionally, S&P Global Market Intelligence projects a decline in GDP from 2.3% in 2022 to 0.4% in 2023.
Durban’s GDP fell significantly in 2020Q2, and it has since taken two years to return to pre-pandemic levels, achieving a growth rate of 1.8% in 2022Q3, and reaching an all-time high of R456 billion.
Despite the record growth of 1.2% from the 2020Q1 pre-pandemic period to 2023Q1, real GDP remains below peak by 0.6% reached in 2020Q1 before the pandemic struck. It is imperative that Durban regains its momentum in the forthcoming quarters to ensure sustained recovery and economic growth.
In South Africa, a significant portion of freight transportation relies on trucks, transporting two-thirds of total freight weight and three-quarters of total freight value. Trucking and land transport businesses operating within Durban are the foundations of the transport, logistics, and shipping sector.
However, the recent torching of trucks in KwaZulu-Natal has not only disrupted the logistics sector in Durban, but also poses a threat to other industries fundamental to Durban’s economy. This trend of extortion has the potential to drive prominent investors away and negatively impact regional trade.
Due to the sector not being fully operational, business profitability is expected to shrink, and local jobs are at risk. Adding to the City's distresses, Durban has also been struck by another natural disaster - a tornado causing damage to properties and infrastructure (water pipelines and power lines) in and around the Inanda area north of Durban. The effect of climate change-induced weather events and infrastructure challenges have caused setbacks in the City’s recovery process. The business sentiment within Durban remains severely depressed by disruptions in the logistic sector, coupled with ailing water and electricity infrastructure. Businesses also bemoan the slow response of the Municipality in addressing service delivery challenges and lack of coherent plans to tackle failing infrastructure. While energy security remains a priority, the City has made slow progress in securing alternate energy with a lack of tangible implementation. Moreover, challenges arising from tighter monetary conditions and inflationary pressures add to the headwinds faced by businesses in the region. These cumulative factors create a difficult environment for the city's economic renaissance.
Both South Africa and Durban's economies are facing significant obstacles to achieving substantial growth. South Africa's overall economic performance is stagnant, and this is influenced by the above- mentioned challenges.
Despite a modest recovery from the impacts of the pandemic, the broader economic issues hinder the City's recovery process further. The combination of these challenges constitutes a barrier to the economy's growth trajectory, concurrently constraining the government's efficacy in addressing and fulfilling the needs of the people. The challenges are likely to keep the business sentiment in Durban severely depressed and Investors may be hesitant to invest here.
Given the current state of the economy in both South Africa and Durban, it becomes crucial for policymakers, businesses, and stakeholders to implement measures to stabilise the energy supply, reduce public debt, and address infrastructure challenges, all of which may help revive the economy and create a more conducive environment for economic growth and investment. Addressing these concerns is a step toward achieving sustained economic recovery and growth.
