Are gross domestic product numbers reliable?

THE quarterly announcement of South Africa’s gross domestic product (GDP) growth is often met with much anticipation. Politicians emphasise the need for inclusive growth, urging economic expansion that benefits all citizens.

However, a fundamental question remains: Can we trust these GDP numbers? Are they understated, and if so, why?

A review of different data sources raises concerns. A publication by the SA Reserve Bank (Sarb) states that from 1994 to 2014, the country’s average GDP growth rate was about 2.38%. However, a more recent statement from Sarb claims an average annual growth rate of 3.3% since 1994.

These figures contradict each other, suggesting possible inconsistencies in data reporting. Furthermore, projections indicate a meager GDP growth rate of 0.8% from 2015 to 2025, with a forecasted increase to 1.2% in 2026, according to Trading Economics. If recent years have seen lower growth, the previous higher estimates may be questionable.

Economic growth should be measured against inflation, which has averaged about 6.5% since 1994. Interestingly, tax collections have grown at a compounded annual rate of 9.9%, increasing from R113.8 billion in 1994/95 to R1.74 trillion in 2023/24.

This raises concerns about whether GDP figures fully account for the economic activity underpinning these tax revenues.

South Africa’s economy is predominantly service-based, with services comprising 73% of the GDP. Yet, service delivery remains a significant issue, particularly in the government and municipal sectors.

The informal economy, estimated at R750bn, accounts for more than 16% of the total GDP but is largely unaccounted for in official figures. This sector supports millions of South Africans, with informal sector workers earning an average monthly income of R4 199—higher than the national average and minimum wage.

The minibus taxi industry, vital for transportation, contributes billions of rand to VAT, fuel levies, and the Road Accident Fund (RAF) but remains largely outside formal taxation structures.

Meanwhile, the decline of rail services by the Passenger Rail Agency of SA (Prasa) has forced a shift towards the informal transport sector, significantly impacting economic calculations.

Recent GDP data has also been questioned in the agricultural sector. Statistics SA (StatsSA) reported a 29% contraction in the third quarter of 2024, the largest in decades. However, a study commissioned by AgriSA and the Agricultural Business Chamber found discrepancies in how agricultural costs were calculated. The Bureau for Food and Agricultural Policy (BFAP) suggested an upward revision of R10.8bn to correct the sector’s real GDP.

Global factors also influence GDP reliability. Businessman Rob Hersov estimates that 20% of South Africa’s GDP is tied to the US. Recent political tensions, such as President Cyril Ramaphosa’s call for less US intervention and allegations of ANC corruption linked to the Israel genocide case, may impact future GDP figures.

The reliability of South Africa’s GDP numbers is further called into question by systemic inefficiencies in governmental institutions. StatsSA admitted that the Census 2022 data collection had major flaws, with a 30% undercount rendering some statistics unusable.

If census data is unreliable, how confident can we be in GDP calculations?

The inconsistencies in GDP reporting suggest a broader issue: whether official economic data reflects the true state of South Africa’s economy. If the informal economy and sectoral inaccuracies are not adequately factored in, GDP figures may be significantly understated.

Given these concerns, greater transparency and methodological scrutiny are essential to ensure accurate economic assessments.

* Corrie Kruger is an independent analyst.

** The views expressed here do not reflect those of the Sunday Independent, Independent Media, or IOL.