Light at the end of the tunnel for South Africa

 ·28 Mar 2024

South Africans live in a challenging time, but financial experts believe the future looks brighter.

Over the last two years, South Africans have faced elevated inflation, high interest rates and increased load shedding.

Despite avoiding a technical recession in 2023, which seemed inevitable at the start of the year due to the heightened intensity of load shedding, South Africa’s GDP only grew by 0.6%.

With the population increasing by around 1.5% to 1.6%, South Africa’s economy isn’t producing enough goods and services to keep up, meaning the population is living in a per capita recession.

Nevertheless, economists, bankers and investors are still optimistic that the economy, rand and interest rates will turn a corner.


According to Bank of America’s (BofA’s) latest fund manager survey for March, the number of respondents who believe that the economy will get ‘a little stronger’ increased from a net 53% (38% in February.)

South African Reserve Bank (SARB) Governor Lesetja Kganyago said South Africa’s economy should improve this year as supply-side issues, such as Transnet’s logistic woes and load shedding, lessen.

The SARB sees GDP growing by 1.2% in 2024 and 1.6% in 2025.

Investec expects GDP to increase by 1.1% in 2024 and 1.5% in 2025.

“The business-government collaboration, embarked on in June last year, has already lowered port congestion but not eliminated it, while the frequency and intensity of load shedding have reduced year on year for 2024,” said Investec Chief Economist Annabel Bishop.

Investec also remains optimistic for the coming years, with 2026, 2027 and 2028 expected growth of 1.9%, 2.2% and 2.4%, respectively.

“2029 is expected to see growth of 2.6% but could approach 3.0% more rapidly if large scale, efficient, private sector operators are crowded into the rail and ports sectors more quickly than currently expected, and electricity reforms accelerate,” Bishop said,


12-month expectations from respondents in the Bofa asli improved to R17.88/$ (R18.35/$).

This is a significant improvement from the current level of R18.93/$

The rand appreciation, however, is only expected to come in the second half of the year, with US interest rate cuts pushed out as the world’s largest economy’s high inflation and strong labour market have lessened the need for a near-term cut.

Bishop said that the US Federal Reserve will only cut rates by June at the earliest, with further cuts into the second half of the year, strengthening the rand.

Interest rates

Although fewer 67% (75%) of respondents in the BofA survey expect inflation to be slightly lower, more than half still believe inflation will drop.

Consumer Price Inflation (CPI) increased from 5.3% in January to 5.6% in February, near the top of the SARB’s 3% to 6% target range.

Although the SARB expects inflation to return to the mid-point target of 4.5% in 2025, it believes that the risks to inflation remain on the upside.

“We also consider the threat posed by El Nińo to food prices and a rand vulnerable to the likely jitters around the 29 May elections as the most significant upside risks to the outlook. Given these risk factors’ unpredictability, the MPC will likely remain cautious for longer,” said the Nedbank Group Economic Unit.

“Consequently, it now seems more likely that interest rates will remain unchanged deep into Q3, followed by two cuts of 25bps each in September and November.

“If these cuts materialise, the repo and prime rates end the year at 7.75% and 11.25%, respectively.”

Bishop also believes that the delay in the US rate cuts and domestic pressures, such as El Nino, will likely push the first interest rate cut to Q3, with the first 25 basis point cut occurring in September.

Numerous economic researchers, including the Bureau for Economic Research, said a decrease in interest rates will lead to consumer relief.

Read: Middle class hanging on by a thread in South Africa – and cutting interest rates won’t help

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