Big trouble for South Africa’s economy

[Nat Quinn]

While South Africa’s economy showed a slight uptick in March 2025, there is a distinct lack of momentum, and concerns over the market chaos lying ahead means the country’s economic turnaround may stall.

This is according to the latest data presented in the BankservAfrica Economic Transactions Index (BETI).

The BETI measures the value of all electronic transactions cleared through BankservAfrica on a monthly basis at seasonally adjusted real prices.

The index recovered slightly in March, hitting a level of 137.1, up 0.3% from February. However, ongoing global uncertainty and weak local growth raise concerns that economic activity may slow, with little indication of a sustained turnaround, the group said.

Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements, noted that March’s slight uptick is actually lower than the level of 137.2 recorded in January, pointing to a stall.

Despite this, the BETI still remains 2.8% above a year earlier, which is positive.

The current levels point to a favourable retail environment, with headline inflation still at the lower end of the SARB’s target band at 3.2%.

This supports an increase in real wages and purchasing power, helped along by lower fuel prices and the interest rate 75bps lower than a year earlier.

But this overall positive set piece is against a backdrop of growing global uncertainty, which casts future prospects into doubt.

Independent Economist Elize Kruger said that the BETI is stuck in “muddling along” mode, and reflects an economy that is unable to gain any meaningful momentum.

This is the same story that played out in 2024, she said.

“The lack of momentum in economic growth is concerning, as the economy remains on the back foot, with population growth outpacing economic growth, minimal progress on employment, a precarious fiscal position and limited capacity to absorb unexpected shocks – especially given current global developments.”

South Africa growth at risk

The escalation in the global trade war—with US President Donald Trump’s announcement of punitive import tariffs to many countries—have been far more damaging than expected.

The impact on the South African economy remains uncertain, with multiple, often opposing, forces at play, Kruger said.

“For example, while the anticipated downturn in the global economy will be negative for commodity demand and prices, the significant drop in the international oil price is likely to soften the trade and inflationary impact on South Africa somewhat.”

A substantial portion of export commodities have been exempted from the announced US import tariffs, which in combination with a weaker exchange rate, could also provide a buffer for the mining industry and subsequently provide some support for the local economy.

“Though the rand has come under significant pressure due to the widespread risk-off sentiment, the price of gold, which is considered to be a safe-haven asset in these turbulent times, has remained elevated, shielding South Africa somewhat from the harsh impact of the sudden negative trade shock,” said Kruger.

Regardless, most analysts and economists have cut South Africa’s growth forecasts from between 1.5% to 2.0% to between 1.0% and 1.5%.

This means even slower growth for economy, which just came from a paltry 0.6% in 2023 and 0.7% in 2024.

Population growth is around 1.5%, meaning, without significant economic growth, South Africans are getting poorer on a per capita basis.

“South Africa is currently facing pressure on both global and local fronts. Uncertainty surrounding the 2025 National Budget has reversed the confidence gains experienced since mid-2024,” said Kruger.

“Stability and strong political leadership are needed to steer the economy through troubled waters. A continued focus on structural reforms could lift the local economy’s growth potential and serve as a buffer during these turbulent global times.”

 

SOURCE:Big trouble for South Africa’s economy – BusinessTech

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