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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
June 3, 2025

GDP, Economic Growth and Inflation

South Africa Economic Performance

2025 Q1

South Africa’s economy grew by 0.1% in Q1 of 2025, surpassing expectations of a 1.3% contraction. This modest growth occurred despite international trade tensions, US aid suspension, and tariffs. Positively, the interest rate cut in January, a stronger rand, stable confidence levels, and consistent electricity supply contributed to the gains.

Among ten sectors, Agriculture (up 4.1%), Finance (up 3.9%), and Trade (up 1.9%) showed annual growth. Conversely, Transport (-2.4%), Mining (-4.2%), Manufacturing (-2.5%), and Construction (-3.2%) saw contractions. Quarterly, Agriculture surged by 15.8%, Transport rose by 2.4%, while Trade and Finance grew by 0.5% and 0.2%, respectively.

The 2025 growth forecast is 1.0%, lower than earlier predictions of 1.6% to 1.9%. This does not adequately address the unemployment crisis. However, stable confidence, reduced load-shedding, and a further 25-basis point rate cut in May could enhance economic activity later in the year.

Ongoing challenges necessitate policy clarity and progress on structural reforms. Diplomatic relations with the US have improved following President Ramaphosa’s efforts in Washington, advocating for AGOA continuation. A stable rand, low inflation, and resolved US trade issues could boost economic growth beyond current forecasts

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More Coverage

The Fuel Factor: Balancing Sticky Inflation with a R415 Billion Investment Anchor

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South African Gold and Foreign Exchange Reserves for March 2026

South Africa’s reserves fell in USD terms in March 2026 as the Rand weakened amid Middle East tensions, though higher gold prices supported reserves in Rand terms. Rising oil prices and currency pressure point to higher inflation risks, while ongoing geopolitical tensions and US trade measures are likely to keep markets volatile.

A Watershed Moment: Global Ceasefire and Massive Oil Correction Offer Crucial Relief for the SA Economy

A sudden global shift has delivered much-needed relief for South Africa. Following a Middle East ceasefire, oil prices have dropped sharply and the Rand has strengthened—easing pressure on fuel costs and inflation. While earlier price spikes still weigh on the outlook, this combined correction offers a critical window for economic stability, improved consumer confidence, and renewed growth momentum.

The Great Fuel Buffer

South Africa finds itself balancing global energy shocks with decisive local action. As rising oil prices threaten to strain consumers and key industries, government intervention has softened the immediate impact—highlighting both the urgency of the moment and the need for smarter, more resilient fiscal tools to manage future volatility.

SARB opts for Strategic Resilience

The South African Reserve Bank has opted for a “hawkish hold,” maintaining the repo rate at 6.75% despite headline inflation hitting a milestone low of 3.0%. Governor Lesetja Kganyago emphasised that while the inflation target has been met, the MPC remains wary of a potential “energy tax” on the economy, driven by global oil prices surging above $100 per barrel. Consequently, the Bank has adopted a cautious, forward-looking stance, slightly lowering the 2026 GDP growth forecast to 1.1% to account for these external shocks and ensure long-term currency stability.