Reality check for South Africa

While economists and analysts are talking up the potential and brighter prospects for South Africa in 2025, the economic reality is that much of the positivity is coming off a low base.

Looking at the latest BankservAfrica Economic Transactions Index (BETI), which tracks the value of all electronic transactions cleared through BankservAfrica at seasonally adjusted real prices, the country is treading water and needs to shift gears to deliver on its potential.

The BETI saw a slight rebound in 2024 following negative growth in 2023. However, the index showed sideways movement in January 2025, indicating a slow start to the year.

The BETI remained above year-on-year levels, which is encouraging, the group said – but with the caveat that in January 2024, South Africa was still being beaten down by high levels of load shedding, so it’s a low base.

For 2024 as a whole, the BETI increased on average by 1.7%, compared to the contraction of 0.5% in 2023.

“The index’s performance in 2024 is a fair reflection of the gradual economic recovery unfolding in South Africa. However, the notable plunge in value-add by the agricultural sector in Q3 derailed the full-year economic growth expectations, leading to estimates of only 0.7% economic growth for 2024 – on par with 2023 levels,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

Continuing the mostly sideways trend, the BETI moderated slightly in January 2025 to an index level of 137.1, down from December’s level of 137.3. However, it is still up by 2.9% compared to a year earlier.

Independent economist Elize Kruger said the index has basically been “treading water” since May 2024, which is to say not really going anywhere.

“But (it’s happening) at an elevated level compared to recent history, which remains encouraging,” said Kruger. “As we enter 2025, fresh drivers are needed to propel the economy into a higher gear.”

Another reality check for growth prospects is the uncertainty of what lies ahead.

While several structural reforms are in the pipeline, coinciding with a cyclical upswing unfolding, it will take time to reflect in improved economic activity from current levels.

Coinciding with these, on a global level, are the ongoing geopolitical tensions as well as the growing threat of a global trade war.

Since the start of 2025, US President Donald Trump has already imposed import tariffs on several countries and, most recently, on specific commodities.

“His recent executive order about aid to South Africa has evoked a notable reaction from different stakeholders. While the impact on the local economy remains uncertain, it is unlikely to be favourable and poses a downside risk to the 2025 real GDP growth forecast of 1.7%,” Kruger said.

Other economic indicators in January were also mixed.

The S&P Global South Africa Purchasing Managers’ Index (PMI) dropped to 47.4 in January, falling below the 50.0 ‘no-change threshold’ and at its lowest since July 2021.

“The notable U-turn in private sector health after four consecutive months of improvement is concerning. Weaker operating conditions were mainly associated with a pull-back in demand, as the volume of new businesses contracted at the sharpest rate since March 2024,” the economist noted.

Lower customer incomes stifled sales, according to some panellists, while others pointed to weaker foreign demand.

Reflecting on prospects in the manufacturing sector, the seasonally adjusted Absa Purchasing Managers’ Index (PMI) also started the year on the back foot, declining by 0.9 points to 45.3 points in January 2025.

This is the third consecutive contraction and the lowest level since August 2024.

“This suggests that the loss of momentum observed in the manufacturing sector at the end of 2024 has not reversed. However, Naamsa revealed a strong performance in January 2025, with new vehicle sales up by 10.4% y/y, a continuation of a strong sales rebound in the fourth quarter of 2024. New passenger car sales were robust, likely reflecting an improvement in household budgets,” Kruger noted.

Following an all-time high in December 2024, the number of transactions that cleared through BankservAfrica in January moderated to 156.2 million compared to the 170.4 million shown in December.

However, the volumes were still 2.7% up from a year ago.

The standardised nominal value of transactions also declined to R1 162 trillion in January 2025 compared to R1 448 trillion in December 2024.

“Despite the issues currently playing out, improved growth in 2025 and into the medium term remains the base case expectation for South Africa, though still off a low base of comparison,” said Kruger.