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It was a quiet week again on the economic front, with only two announcements for manufacturing PMI and new car sales. However, the stage was dominated by US President Donald Trump, with our own President Cyril Ramaphosa mixed in with a very vague Sona.
Tracey-lee Solomon, an economist at the Bureau for Economic Research (BER), says Ramaphosa focused on key economic and governance reforms while indirectly reaffirming South Africa’s sovereignty in response to Trump’s comments on various issues from South Africa’s expropriation of land without compensation to annexing Gaza to build casinos.
A key focus of Ramaphosa’s State of the Nation (Sona) speech was the Medium-Term Development Plan, which aims to boost economic growth to over 3% through large-scale infrastructure investment.
Other encouraging details include mention of the review of a funding model for municipalities to improve service delivery on a local level and the implementation of a digital identity system. There was also much talk of leveraging private capital for railway and logistics, Solomon says.
Ramaphosa also confirmed that the Social Relief of Distress (SRD) grant would be used as the basis for the introduction of a grant to support unemployed people. He also reaffirmed his commitment to National Health Insurance (NHI) despite opposition, stating that it would reduce healthcare inequality.
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Isaac Matshego and Busisiwe Nkonki, economists at the Nedbank Group Economic Unit, also noted that Ramaphosa said infrastructure spending will exceed R940 billion over the next three years, with R375 billion invested by state-owned enterprises (SOEs).
“Under the second phase of Operation Vulindlela, municipalities will receive increased attention to tackle the widespread service delivery failures. The funding model of local government authorities will be reviewed to ensure that they direct the revenue towards maintaining infrastructure.”
Solomon says the other big domestic news was that steel producer ArcelorMittal extended the shutdown of its long steel business by a month to allow further discussions with the government on potential solutions to prevent closure and maintain supply for downstream customers with no immediate alternatives.
“Much of the market’s movement this week stemmed from Trump’s tariff announcements. As risk sentiment surged, safe-haven assets like the US dollar and gold rose sharply, with gold bullion closing at a record $2,869 per ounce on Wednesday. Both later retreated as the initial shock subsided but still ended the week stronger.”
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In a week when the fuel price increased in South Africa, Brent crude oil prices declined, driven by an improved supply outlook as OPEC+ maintained its plans to gradually increase production from April and growing concerns over global demand amid trade tensions.
Bianca Botes, director at Citadel Global, says oil markets faced pressure, with Brent crude hovering around $74.50/barrel. “Trump’s production-boost plans and swelling US inventories weighed on prices, although geopolitical tensions offered some support.”
Gold continued its ascent, flirting with $2,870/ounce and eyeing a sixth straight weekly gain. Safe-haven demand and central bank buying provided tailwinds, Botes says.
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Botes says the dollar is holding firm, with the dollar Index near 107.7. Treasury Secretary Scott Bessent’s strong dollar rhetoric and Fed rate cut expectations are keeping markets on their toes.
“The rand continued its march stronger, with its rate against the dollar making strides towards R18.42/$, as a less tumultuous week and a softer dollar played in its favour.”
Matshego and Nkonki point out that the rand came under pressure early in the week after Trump announced that the US would suspend its cash transfers to South Africa as it reviews the implications of the land expropriation law signed by President Ramaphosa.
Solomon says the rand recovered some losses, ending the week ‘just’ 0.2% weaker against the dollar. The rand was trading at R18.44/$ after starting the week on R18.92/$.
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February’s batch of PMI data reflected a tough start to the year, with the Absa PMI declining from 46.8 to 45.3 in January, contracting for a third straight month.
Nomvelo Moima, economist at the BER, says due to declines in the indices tracking employment and inventories, the headline index dropped to its lowest level in five months. “Encouragingly, although the activity and demand indices remain in contractionary terrain, both registered modest improvements.”
In addition, she points out, despite the index tracking business conditions in six months’ time declining by 2.6 points to 64.9, this still points to manufacturers remaining fairly optimistic about business conditions in the future.
The S&P Global SA PMI also signalled sluggish activity, down 2.5 points to 47.4 in January. Moima says this was driven by weak demand conditions, which led to a sharp decline in output. “However, easing supply chain and price pressures contributed to a strengthening of optimism towards future activity.”
Matshego and Nkonki say manufacturing production likely contracted by 1.7% in December from 2.6% in November. Despite the absence of load shedding, the sector still contends with high operating costs, eroding its competitiveness. These struggles are reflected in the weak PMI outcomes.
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According to the National Association of Automobile Manufacturers of South Africa, new vehicle sales started 2025 on a strong note. Benefitting from some windfalls for the consumer and a low base in 2024, domestic new vehicle sales increased by 10.4% in January compared to a year ago, with passenger vehicle sales surging by 18.3% and exports by 29.7%.
Matshego and Nkonki say the positive momentum in new vehicle sales in the fourth quarter continued into January. Vehicle sales only increased by 2.5% in December. However, they point out that commercial vehicle sales fell by 7.6%.
“Exports increased by 5 803 cars from last year, as passenger vehicle sales recovered, growing by 29.7%. Exports of commercial vehicles also performed well, with 2 293 more exported compared to last year. According to the Automotive Business Council, the improved economic outlook, coupled with higher business and consumer sentiment, will support the new vehicle market.”
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