Businesses brace for VAT hikes, and strike could cripple South Africa

After recovering from a bruising week of tariffs and political instability, South African markets were dealt another blow after comments by the South African Reserve Bank.

The central bank warned on Tuesday that the global uncertainty at the moment was a severe risk to South Africa’s economic growth, and could wipe as much as 0.7ppts off the figure.

The SARB also warned that the room for interest rate cuts had narrowed significantly as a result.

The warnings sent the rand back above R19.00 to the dollar, putting the unit back in territory last seen ahead of the 2024 national elections, where the future of government was in question.

Fortunately, the rand is still not as weak as it was last week, when the Trump tariffs and ructions in the Government of National Unity sent it to its worst-ever level of R19.93/$.

That said, uncertainty is the theme of the day, and markets are on edge as they wait and see what disruption comes next.

On Wednesday, the rand was trading at R19.00 to the dollar, R25.21 to the pound and R21.58 to the euro. Oil was trading slightly lower at $64.31 a barrel.

Here are five other important things happening in and affecting South Africa today:

Countdown to VAT hikes: More service providers in South Africa are letting clients know about incoming VAT hikes, joining a long list of banks, insurers, mobile operators and others who are bracing for the tax to increase to 15.5% from 1 May. Politicians are still scrambling to find a way to reverse the increases, but with just 14 days until implementation, there are severe doubts whether it can be done. [MyBroadband]

Crippling strikes: Unions have sent out ballots to 26,000 workers at Transnet to decide whether they will strike or not. The unions have rejected the state-owned companies wage offer and negotiations fell through. Transnet is critical to rail and port operations and a strike could lead to billions of rands in losses. The last time a strike happened, the country lost hundreds of millions of rands a day. [News24]

Jonas in the hot seat: South Africa’s new special envoy to the United States, Mcebisi Jonas, says he hopes that US officials will look past his previous comments about the Trump administration as he takes up this new role. He called Trump a racist homophobe in an Ahmed Kathrada Annual Lecture in 2020. Jonas said that, at the time, he was outside of government and speaking as an activist. [EWN]

R70 billion blow: South Africa stands to lose big in the US-China trade war, with smaller emerging economies likely to be caught in the crossfire, even if not targeted directly. For South Africa, its alignment with China in BRICS makes it likely that it will be booted from AGOA, which saw over R70 billion in exports access the states. South Africa has exported close to R300 billion to the US through AGOA since 2019. [BusinesTech]

Critical industry pain: South Africa’s mining industry is set to drag the country’s economy in the first quarter of 2025, with mining production on a downward trend. Non-seasonally adjusted mining production declined sharply by 9.6% year-on-year in February. This marks the fourth consecutive month of mining production declines, with January having reported a 1.5% contraction. [Daily Investor]