According to Bloomberg, “South Africa is expected to see its best economic performance in over a decade in 2025, but it still needs to do more to ensure greater access to social services”.
The Bureau for Economic Research (BER) recently increased its growth outlook for South Africa in 2025 to 2.2%, which is well ahead of the South African Reserve Bank’s (SARB’s) outlook of 1.5% and the International Monetary Fund’s (IMF’s) outlook of 1.2%.
Investec forecast data released for Q3.24, and earlier this year continue to support Investec’s forecast of an economic growth rate of 1.0% year-on-year (y/y) or this year, after last year’s outcome of 0.7% y/y, with the 2025 forecast at a faster pace of 1.7% y/y.
The IMF forecasts South Africa’s 2025 economic growth rate at only 1.3% y/y and for 2026 is 1.4% y/y, while Investec forecasts economic growth at 2.0% y/y with greater fixed investment spend.
The South African Reserve Bank maintained its 2024 projection for economic growth at 1.1%, while revising its 2025 forecast from 1.5% upwards to 1.6% and its 2026 forecast from 1.7% to 1.8%. (from 1.7%).
According to The South African Outlook, GDP growth projected at 1.3% in 2024 and 1.6% in 2025, as new infrastructure investments support construction and recovery of other sectors. Inflation is expected to moderate at 4.8% in 2024. As tax revenue collections improve, the fiscal deficit is projected to decline to about 4.3% of GDP in 2023/24.
South Africa’s minister of finance, Enoch Godongwana, Medium Term Budget Policy Statement “Mini Budget” on the 30th October 2024, forecasted a domestic real GDP growth of 1.1 per cent in 2024, which is lower than the estimate of 1.3 per cent in February, with a medium growth forecast of 1.8%.
The International Monetary Fund (IMF) has published its latest World Economic Outlook update for October 2024, reversing its position on South Africa from April 2024, now seeing better economic growth for South Africa. All tough there is a more positive outlook, South Africa is still the lowest growth projection among the headline emerging market economies.
The economic growth rate is nowhere close to where it needs to be to keep up with the country’s population growth, which is about 1.5% per year. The GDP growth would have to match this growth, at minimum, to keep GDP per capita stable.
South Africa’s declining economic growth over the last two decades has led to declining wealth and over the past decade, South Africa’s GDP per capita has declined significantly.
According to the World Bank and the IMF, South Africa’s GDP per capita was around $6,200 by the end of 2023, declining from a peak of nearly $8,000 in the early 2010s.
Macro Assumptions
Interest rate
On the 19th September 2024, the South African Reserve Bank cut its key interest rate by 25 bps to 8% as expected, resulting in a new prime rate of 11.50%. The easing follows seven consecutive meetings at a 15-year peak of 8.25% and it was the SARB’s first policy easing since the Covid pandemic in 2020, as price pressures cooled.
The Monetary Policy Committee will deliver their decision regarding the interest rate on the 21st November 2024. With the inflation rate decreasing, there is expectations for another interest cut at the meeting. Governor of the South African Reserve Bank, Lesetja Kganyago indicated that MPC members considered an unchanged stance, a 25-basis point cut, and a 50-basis point cut, however, “The MPC ultimately reached consensus on 25 basis points, agreeing that a less restrictive stance was consistent with sustainably lower inflation over the medium term“.
Inflation rate
For the first time in more than three years, the annual inflation rate decreased to 4.4% in August from 4.6% the prior month, dropping below the midpoint of the central bank’s preferred target range of 3% to 6%. According to the South African Reserve bank, it is projected that inflation will remain below the 4.5% midpoint until 2026. Inflation projections were lowered, with 2024’s forecast cut to 4.6% from 4.9%, with the 2025 estimate reduced from 4.4% to 4% and the 2026 projection trimmed from 4.5% to 4.4%.
Unemployment
Bloomberg report on the 12th November 2024, that the unemployment rate decreased for the first time in a year, down to 32.1%, improving by 1.4 percentage points over the previous quarter, according to the data released by Statistics South Africa, earlier in that week. Bloomberg economists forecasted for the jobless rate @ 32.85%.
Source: Stats SA
The IMF does not expect a turnaround in the country’s unemployment crisis in the next two years, projecting an average unemployment rate of 33.7% in 2024 (up from 33.1% in 2023), and an increase to 33.9% in 2025.
Exchange rate
According to the Economy Forecast Agency, the Rand will perform against the three main currencies as follows:
| Currency | Dec 2024 | Dec 2025 | Dec 2026 |
| Dollar | 19.39 | 18.52 | 18.97 |
| Euro | 19.59 | 19.20 | 20.30 |
| Pound | 23.59 | 23.57 | 24.10 |
Two-pot Retirement withdrawals and consumer spending
Absa expects R78bn in two-pot withdrawals in first year, with Stanlib forecasting it to be around R50bn.
Big banks, asset managers and economists are expecting withdrawals from the two-pot saving of pensions totalling between R50 billion and R100 billion for 2024-2025.
On the 14th October 2024, the South African Revenue Service (Sars) announced that a total gross lump sum paid out in the two-pot withdrawals to date is R21.4 billion. This amount has increased significantly from the R4 billion announced on 11 September 2024.
According to Stanlib senior economist Ndivhuho Netshitenzhe, “While some surveys seem to suggest that up to 50% of the money withdrawn will go to paying down debt, we argue that a large portion will simply be used for general consumption”.
As South Africans make withdrawals, economists expect consumer spending to increase in the last quarter of 2024 and are likely to spend more at retail stores, on travel and even large purchases like cars and deposits on new homes, and hopefully also paying down debt they may have.
Vehicle sales
According to The Economist Intelligence Unit Limited, new-vehicle sales across the world’s 60 biggest markets will hit 97.2m units in 2025, surpassing their 2017 record. They forecast that sales of new cars will rise by 2% and of new commercial vehicles (CVs) by 4%, with Electric vehicles (EVs) remaining the best-performing segment, increasing by about 16% to 19.4m units. EV prices will remain high due to rising trade barriers that will prevent faster market growth and fracturing supply chain.
New-car sales growth was marginal in 2024, but in 2025 the market will expand by a healthier 2.3% year on year, mainly due to the expansion in the EV market. Sales of new CVs will rise by a robust 4% year on year, although slower than in 2024. According to Statista, unit sales in the Commercial Vehicles South African market are projected to reach 206.40k vehicles in 2024, with a projected market volume growth of 258.70k vehicles by 2030. The production of Commercial Vehicles market is expected to reach 404.20k vehicles in 2030.
Automation and artificial intelligence (AI) will continue to be integrated into new vehicles, but self-driving cars are still a far way off. Mercedes Benz will introduce an AI-based “super assistant” in every car that it makes, in 2025. Kia’s new EV3 model from South Korea will feature a new voice assistant based on ChatGPT. Volkswagen has already integrated ChatGPT into its IDA voice assistant, which assists drivers to control navigation and air conditioning, or to answer basic questions.
Norway, which is the world’s most rapid adopter of EV technology, aims to be the first country to make all new cars emissions-free in 2025, however it is likely that they will push this target back to 2027 for vans and 2030 for medium and heavy CVs (trucks and buses). EU policymakers pushed back the implementation of Euro 7 emission standards from mid-2025 to 2028, citing the need to strike “a balance between environmental goals and the vital interests of manufacturers”.
The EU is however pushing ahead for tighter carbon-dioxide (CO2) fleet targets. As from 1 January 2025 “the average emissions of European automakers’ new vehicle sales must be below 93.6 grams of CO2 per kilometre (g/km), 15% lower than the 2021 baseline of 110.1 g/km”.
Cyber Crime
Worldwide, cyber risks are considered as a top global risk for the financial sector and the economy as a whole. Beinsure Cybercrime projections for 2025:
Source: BEINSURE
In implementing new software, digital supply chains or planning system upgrades in the new year, it will be imperative to integrate updated cybersecurity configurations. Advances in Artificial Intelligence (AI) will make scamming easier, thus employ people and implement processes that have experience with digital supply chains and software to ensure that security measures are implemented correctly.
Data privacy laws often require changes to how companies store and process data. Implementing or upgrading your current procedures and systems, ensure your business is in adherence to proper cyber security protocols.
According to the 2024 IBM Cost of a Data Breach Report, there has been a significant breach cost increase of 10% from the year prior, the largest yearly jump since the pandemic.
The continued growth in ransomware attacks and cybercrime will in all likelihood be marked by an increased use of AI and Machine Learning (ML) by cybercriminals. Businesses will need to invest in robust security measures, remain diligent and up to date on the latest trends, and educate their employees about how to identify and avoid cyber-attacks.
Renewable Energy
In 2022, Eskom launched the two-year Generation Operational Recovery Plan, the key aim of which was to increase the amount of power, known as the “Energy Availability Factor” (EAF) to 70% of the network’s potential. As a result, a programme of planned maintenance could be carried out, which resulted in a substantial reduction in unplanned outages at Eskom’s power stations, that had been caused by break downs in units. On July 4, 2024, the country has experienced 100 days without load shedding. On the 23rd July 2024, the energy capacity reached 35,000 MW, its highest in six years. This continuous supply of electricity has a huge positive, impact on the sustainability of businesses.
According to a report the ‘Energy Market Projections’ by Standard Bank and Cresco Group, South Africa will only meet its current energy demand requirement by 2040. The market assessment of South Africa indicates solar PV and wind installed capacity, utility and rooftop, will increase from 10 GW this year to 37 GW by 2030 and 77 GW by 2040. The report further indicates that as many as 27% of coal-fired power stations will still be present in the country’s energy mix in 2040.
According to the report, renewable-energy generation is set to increase to 97 TWh, which is 30% of total 2024 energy generation by 2030 and to 179 TWh, which is 50% of total 2024 generation by 2040.
“Clients are adopting a cleaner and more cost-effective approach to address power needs; however, we still anticipate green hydrogen adoption will gain momentum closer to 2030 or beyond, rather than by 2025, and its primary applications initially may not be for electricity generation,” says Standard Bank head of power Rentia van Tonder.
“With generation projected to only meet 2024’s demand by 2040, renewable-energy implementation in South Africa needs to increase at a dramatic rate. If the embedded market were to grow or if selling excess energy back into the grid became a reality, it could play a significant role in meeting national demand,” says Cresco Group executive director Robert Futter.
Data centre operator Teraco has started constructing its 120MW utility-scale solar PV power plant in the Free State. Teraco has partnered with JUWI and Subsolar to develop the 120MW solar PV plant. Upon completion in late 2026 and when fully operational, the 120MW solar PV plant is expected to produce more than 354,000 MWh annually.
During his recent visit to the United States, President Ramaphosa has highlighted the importance of investment from the US. He announced an investment target of approximately R2 trillion ($100 billion) by 2028, including renewable energy initiatives.
Global Outlook
The International Monetary Fund (IMF) has revised its 2024 global economic growth forecast to 3.1 per cent, up from 2.9 per cent in October of last year and a growth of 3.2% for 2025.
Commodity prices are expected to continue to decline in 2024 and 2025, with global inflation expected to decline faster than previously expected due to softening labour markets, lower
energy prices and easing supply side constrains. They are expecting the inflation for advance economies to decrease from 4.6% in 2023 to 2.6% in 2024 and 2% in 2025.
According to FocusEconomics the global growth to slow slightly to 2.8% in 2025 from 2.9% in 2024, which would be the worst reading since 2020, at the height of the global pandemic.
They forecast global inflation to decrease downwards to 3.5% on average next year from 5.3% in 2024, less than half the 2022 peak. Inflation will however still be above the 2010s level, due to countries’ generally reduced openness to free trade and preference for establishing secure supply chains over those of lowest cost.
According to the World Bank Global Economic Prospects of June 2024, global growth is forecasted to stabilize at 2.6 percent this year, holding steady for the first time in three years, with an expected upwards growth to 2.7 percent in 2025-26 amid modest growth in trade and investment.
Moderate global inflation is projected averaging 3.5 percent this year. Given continued inflation pressures, central banks in both advanced economies and emerging market and developing economies (EMDEs) will likely remain cautious in easing monetary policy. It is expected over the next few years, that the average benchmark policy interest rates will remain about double the 2000-19 average. Global inflation is expected to settle at an average rate of 2.8 percent, by the end of 2026, broadly consistent with central bank targets.
Conclusion
“The light seems to be shining brighter at the end of the tunnel for South Africans”, said Terence Hove, Financial Markets Strategist Consultant to global multi-asset brokerage firm , in September 2024.
Despite many challenges, it does appear that there is a more positive outlook for South Africa economic growth in 2025.
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