South Africa takes a hit

The latest BankservAfrica Transaction Index (BETI) hit its lowest point this year in April 2025, marking a month of economic slowdown.

According to the the group, the index hit 136.4 in April, down by 0.6% on the 137.2 recorded in March.

Although still 1.5% higher than a year ago, the slowdown in the BETI reflects the impact of April’s market turmoil.

This came after the announcement of US punitive import tariffs, marking the beginning of a developing trade war leading to daily volatility, plummeting markets, and slashed global growth forecasts.

“Confidence levels across the globe and in South Africa have been knocked by the sheer uncertainty that these developments brought on,” the group said.

Independent Economist Elize Kruger said that the low confidnece levels and uncertainty were detrimental to economic activity, as investors and households hold back on spending, waiting for more stability.

“While the net effect of global developments is negative for the South African economy – prompting a downward revision of 2025 growth forecasts by around 0.5 percentage points – several offsetting factors are offering some relief,” BankservAfrica said.

The global downturn is expected to dampen commodity demand and prices, but lower international oil prices are easing inflation pressures, and rising gold prices may help counter export losses.

Additionally, many South African export commodities remain exempt from US tariffs, providing potential support for the mining sector and broader economy.

BankservAfrica pointed to other economic indicators in the month that came out mixed.

The S&P Global South Africa Purchasing Managers’ Index rose to 50.0 in April, increasing from 48.3 in March, following four months in negative territory.

Meanwhile, the seasonally adjusted Absa Purchasing Managers’ Index remained in contractionary territory for a sixth consecutive month.

StatsSA data also recently confirmed that the manufacturing sector has entered a technical recession with two consecutive quarterly contractions.

More encouragingly, Naamsa figures revealed that the strong performance in the vehicle sales market continued in April 2025.

“All indicators point to the likelihood that, after several false starts, full-year vehicle sales in 2025 will finally return to pre-Covid levels, reflecting, amongst others, an improvement in household budgets due to lower inflation and interest rates,” Kruger said.

More positive days ahead

Despite the negative indicators in April, there was also a shift in tone in as the month progressed.

This included positive “pockets of excellence” such as in the renewable energy, automotive, and financial sectors, and positive developments relating to the de-escalation of the global trade war in recent days.

This means that South African economy can start to regain momentum in the second half of the year Kruger said.

“The launch of the second phase of Operation Vulindlela is also a positive development, confirming government’s commitment to push forward on much-needed structural reforms,” she said.

After reaching an all-time high in March, the number of transactions cleared through BankservAfrica in April 2025 subsided to 167.9 million compared to 172.4 million in March, but still 7% up on a year ago.

The standardised nominal value of transactions eased off to R1.320 trillion in April compared to R1.365 trillion in March 2025, with the average value per transaction, tracked in the BETI, continuing on its downward trend to R7,482.

According to Kruger, some structural tailwinds should continue to push economic activity higher on the local front in 2025 despite global developments.

With inflation currently at 2.7%, below the South African Reserve Bank (SARB) 3-6% target band, there is significant room to cut interest rates from the current repo rate level of 7.5% by at least 50bps.

“Real interest rates are simply unnecessarily punitive for an economy muddling along, unable to gain meaningful momentum,” said Kruger.

At 4.3%, the average real repo rate remains highly restrictive, especially when compared to the neutral level of 2.7%.

Meanwhile, the rand has regained nearly all its post-US Liberation Day losses, helped by some weakness in the US dollar, and is trading at fairly strong levels.

“The low inflation rate will also play a key role in supporting the recovery of salary earners’ purchasing power. With average salary increases expected to be between 5% and 6%, 2025 will be the second consecutive year of real salary increases, which should boost consumer spending,” Kruger said.