Ina Opperman

By Ina Opperman

Business Journalist


SA’s economic outlook much better than a year ago despite ‘year of Trump risk’

Unfortunately, the outlook shows that SA will not reach growth of 3% to ensure enough jobs and economic growth in the country.


Economists say South Africa’s economic outlook is much more positive than a year ago despite the economic noise caused by US president Donald Trump, provided the country keeps its focus on what it can control.

Mike van der Westhuizen, portfolio manager at Citadel, says while the notoriously unpredictable Trump’s return to the White House may cause market and currency jitters, South Africa must focus on more fundamental local factors it can control to strengthen the economy.

“Right now, Trump policy is the biggest known-unknown of 2025. The big question around US policy is whether the bark is bigger than the bite. What we do have control over is how we manage the systemic issues in the local economy and this is where our new government of national unity (GNU) needs to act.”

He expects South Africa’s economic growth to average around 1.8% per year, although growth closer to 3% is required to sustainably grow the country out of its unemployment crisis and shaky but improving fiscal position.

“To turn the tanker around, it is time to turn the massive uplift in sentiment towards the new GNU into real action. While many departments are sailing ahead with new and improved initiatives, actual economic progress has been mediocre. Government must now start walking the talk in a more meaningful and impactful way.”

ALSO READ: No significant economic growth expected for SA over next three years

Energy and water: the elephants in the economic room

Van der Westhuizen says regarding energy security, the break in load shedding has been an immense tailwind but more must be done to ensure longer-term energy security. “Fixing the rail and port issues is critical to our export sector and has cost foregone trade revenue.

“Other issues, like water security and decay at municipal level, are also problems that require urgent attention. Policy execution has hamstrung progress in the past, and the GNU now has the perfect opportunity to prove the doubters wrong.”

He points out that while South Africa experienced a period of low inflation, energy prices are still elevated, while global food inflation is increasing. “Local inflation should remain ‘well behaved’, which gives the South African Reserve Bank (Sarb) room to cut interest rates twice or three times in 2025.”

When it comes to economic growth, Citadel expects a moderate slowing in global economic growth in 2025, while global markets could experience heightened volatility over the next few weeks due to “Trump policy risk”.

Meanwhile, Van der Westhuizen says a strengthened dollar will temporarily push down the rand, which could stabilise at around a “fair” R19 to the dollar.

ALSO READ: Unemployment underscored by weak economic activity – 1 in 3 unemployed in SA

Keeping an eye on US and China

Looking at offshore investment, Van der Westhuizen says the US is still riding a two-year high off its exceptionally powerful equity market. “Earnings expectations on US technology, in particular, are relatively high and leave little margin for disappointment this year.

“Outside of technology, there are early signs of a broadening out in US ex-tech. The team still believes US equities are more favourable than developed market ex-US for the time being.”

He says the Chinese equity market is something to keep an eye on. “Should China stimulate its economy further, as we expect, there could be a decent upside for emerging markets, but their fate relies on a weaker US dollar.

“China will watch Trump’s policy announcements before shooting the proverbial bazooka on more stimulus. A Chinese economic resurgence will benefit Europe, a big trading partner and South Africa through the resources channel.”

How will economies survive 2025? Van der Westhuizen says the Trump comeback will likely bring back unusual and ambiguous methods of announcing decisions which will heighten volatility. “This calls for well-diversified portfolios and good tactical asset allocation and stock selection. Volatility presents opportunity. This year will favour those who manage risk well.”

ALSO READ: New US president Donald Trump: trump card or trade war?

PwC: 2025 will be more positive than 2024 for economic outlook

Lullu Krugel, partner and chief economist at PwC, says South Africa begins each year with uncertainty over its economic trajectory. “However, at the start of 2025, there is much more to be positive about compared to 12 months ago.

“Economists expect lower inflation, a decline in interest rates and higher economic growth in 2025 to support better business and investment conditions this year compared to 2024. All of this points to better conditions for consumers as well in terms of their spending power. This, in turn, is good news for our consumer-driven economy.”

According to PwC’s latest economic outlook, inflation is forecast to average 4.5% in 2025. The Sarb said in November that while inflation is expected to be contained in the near term, the medium term outlook is highly uncertain due to upside pressures on the cost of food, electricity, water, insurance and wage settlements.

“We do not yet know by how much electricity prices will increase in 2025 but can venture an estimate of 10% to 20%. Regarding water prices, there is no comprehensive public data set covering tariffs set by the country’s Water Services Authorities although Statistics South Africa data shows water prices have increased above the inflation rate since 2017.”

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Two repo rate cuts in PwC economic outlook

According to the outlook, PwC expects the Monetary Policy Committee (MPC) to reduce the repo rate by another 50 basis points in the first quarter of the year.

PwC also notes that Sarb governor Lesetja Kganyago said in November that the inflation target review is concluding. Krugel says an announcement on a lowered target (potentially 3%-5%) could be made in the short term.

“Changing the target is best during times of low inflation. A lower target and lower inflation expectations could result in lower long-term interest rates.”

Krugel says after disappointing gross domestic product (GDP) data for the third quarter of last year, the economy expanded by only 0.4% compared to 2023 during the first three quarters of 2024. “We expect a full-year growth rate near that level.

“PwC forecasts economic growth of between 0.5% (downside scenario) and 1.3% (upside scenario) in 2025, with the range in projections reflecting the many uncertainties for the year ahead.”

ALSO READ: SA economy expected to improve in 2025, but geopolitical risks remain

How can SA ensure a better economic outlook?

She says to secure a higher economic growth rate in 2025, the country needs favourable monetary conditions to support household spending, which accounts for >60% of GDP, public-private collaboration to implement reforms needed to boost the investment environment, increased tax collections to reduce the tax gap and improved logistics to support export revenues.

“The economy is forecast to create around 115 000 jobs in 2025, based on the long-term relationship between economic and employment growth, compared to an expected increase of about 340 000 in the labour force. This would result in the unemployment rate increasing from 32.7% in 2024 to 33.2% in 2025.”

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