BUSINESS REFLECTION: Loaded for Bear: SA’s GDP and fiscal numbers get a lift from zama zamas

South Africa’s Treasury once again has reason to be grateful to the mining industry, but this time round it’s the zama zamas who deserve a round of applause.

To wit, South Africa’s gross domestic product (GDP) has just undergone a twice-a-decade rebasing, in line with standard international practice, shifting the base year to 2022 from 2015.

Also referred to as the reference year, this is done to calculate GDP in constant currency terms and capture the changing structure of the economy.

This is not a case of smoke and mirrors. Indeed, it is a case of smoking out uncounted activities to better reflect the size of the economy.

And lo and behold, one economic activity that had been literally underground for years has been brought into the light of the GDP data.

“The 2026 benchmarking and rebasing raised the level of the economy in 2022 to R6.99-trillion, up by 4.9% from the previously published R6.667-trillion,” said Statistics South Africa (Stats SA).

“The largest change occurred in the mining industry (up by 12.5%). This was due to the inclusion and better coverage of illegal mining.”

The term of art on this front is “non-observed economy” or NOE, which Stats SA said accounts for 8.7% of the economy.

“After the pandemic, the NOE increased significantly. Compared with previous estimates, the revised estimates show a larger contribution of the NOE to the economy,” Stats SA said.

Gross product

GDP is the sum of all the goods and services produced in a country over a specific timeframe, and the bottom line is that those linked to zama zamas and other “informal” economic actors have now been subjected to heightened scrutiny to derive a more accurate estimate.

“Estimates cover chiefly illegal production and sales in categories such as cannabis, abalone, diamonds and precious metals. In the mining sector, specific attention is given to artisanal and illegal mining [zama zamas],” Stats SA said.

The methodology casts a wide net and includes “... the unauthorised trade in firearms, ammunition, explosives and motor vehicles”.

It must be said that while the mining sector had the biggest uplift in percentage terms because of the raised profile of its illegal side, it remains dwarfed by others such as finance, which contributed a larger sum to the overall GDP number.

But every little bit helps, and the zama zama contribution, while small overall, was one of the big surprises in the rebasing.

This, in turn, has had a seismic impact on South Africa’s key fiscal ratios, which are suddenly much better than they were when Finance Minister Enoch Godongwana unveiled the Medium-Term Budget Policy Statement (MTBPS) last month.

Most of these metrics are measured against GDP, and when your GDP is bigger, your debt levels, as a ratio by comparison to it, shrink.

A National Treasury statement said that it had recalculated these metrics in the wake of the rebasing. The debt-to-GDP ratio – watched like a hawk by markets and credit agencies – is now estimated to peak at 74.6% in 2025/26, down from the 78.4% pegged in the MTBPS.

That’s a fall of almost four percentage points. This, folks, is a big bloody deal and could potentially trigger another credit upgrade and the lower borrowing costs and enhanced investor confidence such a move would herald.

“Other key fiscal ratios have likewise shrunk. The primary surplus is 1.6% of GDP in 2026/27 (1.7% in the MTBPS), rising to 2.8% in 2029/30 (2.9%), while the 2026/27 main budget deficit is 3.5% of GDP (3.7%),” Treasury said.

It’s important to note that this has not altered the revenue, spending or overall debt estimates outlined in the MTBPS. But it does give the Treasury more room down the road if, for example, GDP estimates disappoint – which is often the case.

Mining is still the backbone

In the MTBPS, the mining sector played a starring role in delivering a fiscal boost from higher precious metals prices, which translated into increased taxes as royalties. The projection for gross tax revenue for this year was revised upwards by R17.1-billion, compared with the February estimate, in large part as a result of that windfall.

Now zama zamas have also improbably done their small part to help dig South Africa itself out of its big fiscal hole – and illegal mining’s contribution to GDP almost certainly remains underestimated.

This has taken place against the backdrop of moves to formalise the sector (read: artisanal mining) – a daunting task. The criminal syndicates behind South Africa’s illegal mining sector have guns galore, and no doubt prefer to remain in the shadows and out of the prying eyes of the SA Revenue Service.

Security costs for the legal mining sector, meanwhile, continue to mount in the face of the zama zama spectre. But at the end of the day, that all gets crunched into the GDP number, which is morally neutral – the good, the bad and the ugly are all counted.

It all adds up to a more attractive fiscal picture on the broad canvas of the economy. DM