Navigating the Storm: Global and Local Trends Shaping South Africa’s Economic Outlook

By Elise-Marie Steenkamp

Rawsonville. – The South African economy has endured a turbulent few years marked by rolling power cuts, failing infrastructure, spiralling costs, and a volatile global backdrop.

While there are glimmers of progress, both domestic and international headwinds continue to shape the country’s prospects in complex ways, according to Nicky Weimar, Nedbank Chief Economist, who shared her perspective at the Canning Fruit Producers’ Association (CFPA) annual general meeting held recently.

Weimar said that South Africa endured some tough lessons over the last two years. “Our economic growth has been ‘patchy’ amid a barrage of shocks, and while there were hopes for a compelling recovery in 2023, these hopes were dashed by persistent power shortages, failing infrastructure, surging food and energy prices, and steep interest rate hikes that eroded household disposable incomes. For most of 2022 and 2023, load-shedding dominated daily life and business planning.”

Yet, by the second half of 2024, there were reasons for cautious optimism, she said. The formation of the Government of National Unity (GNU) and easing structural constraints – particularly in energy, transport, and water – signalled potential for improvement. Falling inflation and modest interest rate cuts also offered consumers some breathing space.

While political stability initially boosted sentiment, the GNU’s honeymoon period ended abruptly with protracted budget negotiations that exposed deep divisions among coalition partners. “Politicians need to grow up and adopt a pragmatic, results-driven approach, much like businesses that routinely collaborate across personal and ideological divides.”

Weimar pointed out that South Africa’s economic trajectory cannot be separated from global developments. Recent shifts in US policy under President Trump’s second term, for instance, have disrupted the post-World War II economic order.

She unpacked her argument as follows: “The old rules-based system – built on open markets, soft power, and predictable trade policy – has been replaced by a more transactional, unpredictable approach. Key features include universal, arbitrary tariffs instead of targeted, negotiated ones, which create chaos in global supply chains. Strict immigration controls undermine the US’s agricultural production, which depends heavily on migrant labour. This has knock-on effects on food prices and trade flows. Deregulation and aggressive tax cuts fuel debt accumulation and have implications for US bond markets and global interest rates. The resulting uncertainty has slowed global trade, disrupted supply chains, and is expected to reduce global growth.”

Weimar said that the International Monetary Fund (IMF) expects global growth to soften, with the US slowing significantly while China remains relatively resilient. The impact of the US trade war could be modest if commodity prices hold – a crucial factor for South Africa given the country’s heavy reliance on commodity exports.

In 2024, China accounted for 10.8% of South Africa’s exports, with the US in second place at 7.7%. On the import side, China was the most significant (21.6%), with the US ranking fourth at 6.5%. Higher global tariffs and slowing demand, however, threaten South Africa’s competitive position.

Domestically, some green shoots are visible. Eskom’s performance has improved compared to its worst levels in 2023. Logistics reforms are starting to bear fruit, with road freight stabilising, rail volumes picking up, and ports handling more bulk tonnage.

Nevertheless, South Africa still ranks among the most restrictive economies in terms of product market regulation. Supply-side gains have been too marginal to drive a significant production recovery. Mining output remains depressed. Manufacturing has relapsed to levels seen after the global financial crisis, and fixed investment has now contracted for six consecutive quarters.

Weimar said that the Government’s plan to spend R1 trillion on infrastructure over the next three years could provide a vital boost. “Provincial and local governments will need to play a key role in ensuring delivery across priority areas such as logistics, energy, water, education, housing, and healthcare.”

If effectively implemented, such investments could help address long-standing bottlenecks, stimulate job creation, and lift business confidence, she added.

Despite years of pressure, consumer spending – which accounts for nearly two-thirds of South Africa’s GDP – has accelerated in early 2025. This rebound has been driven by rising real disposable incomes, improving confidence, and modest debt relief as interest rates eased slightly. Inflation remains contained, with headline and core measures hovering around 3%. Falling fuel prices have helped offset rising food costs. However, the rand remains vulnerable, sensitive to both domestic political uncertainty and global currency shifts.

The US dollar’s path will be pivotal. While the dollar has weakened slightly, it remains historically strong. Markets expect the US Federal Reserve to prioritise growth concerns over inflation, potentially cutting rates – a move that could support emerging market currencies like the rand.

Weimar expects inflation to rise gradually but modestly over the coming year, with the South African Reserve Bank aiming to anchor it around 3% rather than the previous 4.5%. Factors to watch include food prices, electricity tariffs, and currency fluctuations.

“Global oil prices are expected to remain subdued due to oversupply, which could help keep inflationary pressures in check,” she said. “South Africa’s economic fundamentals – from consumer spending capacity to planned infrastructure investment – provide a foundation for cautious optimism. Yet the challenges remain formidable: an underperforming manufacturing sector, weak investment levels, policy uncertainty, and the disruptive effects of shifting global trade dynamics.”

Weimar’s message was clear: progress is possible, but it requires political maturity, effective execution of infrastructure plans, and resilience in navigating an unpredictable global environment.

“In the end, the country’s economic fate will depend not just on external winds, but on whether South Africa can finally turn incremental reforms into sustained momentum.”

Caption: Jacques Jordaan (CFPA CEO), Nicky Weimar (Nedbank Chief Economist) and Anthony Dicey (CFPA Chairman).