{"id":820406,"date":"2025-04-10T16:00:00","date_gmt":"2025-04-10T14:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=820406"},"modified":"2025-04-10T15:48:21","modified_gmt":"2025-04-10T13:48:21","slug":"another-disaster-for-south-africa-enters-view","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/820406\/another-disaster-for-south-africa-enters-view\/","title":{"rendered":"Another disaster for South Africa enters view"},"content":{"rendered":"\n

Economists believe the South African government is grossly overestimating growth prospects for 2025, warning that a global and local recession could do untold damage.<\/p>\n\n\n\n

Tabling the 2025 budget in March, Finance Minister Enoch Godongwana put his estimates of GDP growth for the year at 1.9%.<\/p>\n\n\n\n

Even among the most bullish economists, this was, at the time, on the high-end of estimates, with most seeing growth around 1.6%.<\/p>\n\n\n\n

This was, of course, before US President Donald Trump launched a global tariff war, imposing a 10% tariff minimum on all countries, and far higher for those that have “excessive” trade surpluses with the States.<\/p>\n\n\n\n

With tariffs ranging from 10% to 50%\u2014and then as high as 125% when Trump took on China directly\u2014global markets were shaken, leading large financial groups to underline a US recession in their forward projections.<\/p>\n\n\n\n

Having found some semblance of root in the White House, these warnings reportedly led to Trump hitting pause on the tariffs on Wednesday night.<\/p>\n\n\n\n

The US president announced that all tariffs above 10% would be paused for 90 days\u2014except for China, which was slapped with the aforementioned 125% rate.<\/p>\n\n\n\n

Critically, the 10% tariff remains in effect, as does the more targeted 25% tariff on all vehicle exports.<\/p>\n\n\n\n

While this was enough for big banks to walk back from having a US recession as a certainty, global anxieties over the tariffs remain, along with the impact they will have on global economic growth.<\/p>\n\n\n\n

Economists have not predicted a recession for South Africa in 2025, but this is small consolation when GDP growth is already anaemic and not beating population growth.<\/p>\n\n\n\n

GDP growth in 2023\u2014wiped away by the worst levels of load shedding on record\u2014scraped by with a surprising 0.6%. Despite some strong recovery in sentiment, 2024 did not fare any better, coming in at 0.7%.<\/p>\n\n\n\n

While hopes were for a much stronger showing in 2025\u2014and president Cyril Ramaphosa aiming for a lofty 3%\u2014it does not look like it will be that much better.<\/p>\n\n\n\n

According to Efficient Group chief economist Dawie Roodt, “If we get 1% we will be lucky”. Most banks and economists have slashed their outlooks to between 1% and 1.5%, with risks to the downside.<\/p>\n\n\n\n

Even with no recession expected in South Africa, if one hits the United States and wider global market, the impact on the fragile local economy would be profoundly negative.<\/p>\n\n\n\n

How a recession would hit South Africa<\/h2>\n\n\n\n
\"\"<\/a>
Aluma Capital Chief Economist, Frederick Mitchell<\/figcaption><\/figure>\n\n\n\n

Aluma Capital chief economist Frederick Mitchell said that a looming global recession, coupled with South Africa\u2019s fragile fiscal state, presents significant threats to employment, trade dynamics, and government finances in 2025. <\/p>\n\n\n\n

For employment, a recession generally leads to decreased consumer spending, causing businesses to cut costs, often through layoffs or hiring freezes. <\/p>\n\n\n\n

“In South Africa, where unemployment rates are already high, an economic downturn could further exacerbate these figures,” Mitchell said.<\/p>\n\n\n\n

With many sectors, including tourism, manufacturing, and services reliant on domestic and international trade, job losses are likely.<\/p>\n\n\n\n

As has already been widely laid out, the impact of the Trump Tariffs\u2014even at 10%\u2014is bad news for the economy. <\/p>\n\n\n\n

Tariffs on South African exports to the US will increase costs and reduce competitiveness, while the trade war between the US and China could potentially drive-up prices for imported goods.<\/p>\n\n\n\n

South African consumers will pay the price and face higher costs for foreign products, Mitchell said.<\/p>\n\n\n\n

“South Africa would likely see a contraction in both exports and imports, directly affecting economic growth rates in the short-to-medium term,” he said.<\/p>\n\n\n\n

Perhaps the most detrimental impact would be how all of these drawbacks impact government finances, which are already extremely tight.<\/p>\n\n\n\n

Mitchell noted that with R424.9 billion earmarked for debt servicing in the 2025\/26 fiscal year and projected to grow by 7.1% annually, the government\u2019s fiscal space would further constrict. <\/p>\n\n\n\n

“Any downturn would likely escalate the difficulty of managing existing debts and the repayment of these debts in future,” he said.<\/p>\n\n\n\n

Economic slowdowns generally lead to lower income and value-added tax collection due to reduced corporate profits and household incomes. <\/p>\n\n\n\n

As businesses struggle and unemployment rises, tax revenues may fall short of projections, exacerbating the deficit.<\/p>\n\n\n\n

This in turn gives the government much less money to work with, putting pressure on key spending items, like social programmes.<\/p>\n\n\n\n

“With approximately 61% of government expenditure devoted to social grants, healthcare, education, and housing, a recession could necessitate a re-evaluation of these budgetary allocations,” the economist said.<\/p>\n\n\n\n

“The government may be forced to cut back on social spending at a time when it is needed most, potentially leading to increased social tensions and even unrest in some cases.”<\/p>\n","protected":false},"excerpt":{"rendered":"

The threat of recession in the United States could tank the global economy\u2014and South Africa with it. Economists lay out what this could mean for jobs, trade and government finances.<\/p>\n","protected":false},"author":10,"featured_media":812963,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[21743,1459,10849,22000,6324,3281],"class_list":["post-820406","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-aluma-capital","tag-dawie-roodt","tag-donald-trump","tag-frederick-mitchell","tag-recession","tag-tariffs"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/820406","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=820406"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/820406\/revisions"}],"predecessor-version":[{"id":820447,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/820406\/revisions\/820447"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/812963"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=820406"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=820406"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=820406"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}