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

June 10, 2025

South Africa

Gold and Foreign Exchange Reserves

May 2025

The South African International Liquidity Position, reflected by Net Gold and Foreign Exchange Reserves, grew in USD terms but came slightly down in Rand terms due to the appreciation of the Rand against the Dollar in May 2025. The Rand appreciated by nearly 60c against the Dollar during the month, reserves increased by around $500 million, boosted by a monthly growth of 0.7% and an annual growth of 40.5% compared to the 2024 price for gold in the month of May.

Foreign reserves also surged from again in Dollar terms from April to May, highlighting the Reserve Bank’s stance on buying more Dollars to boost the South African International Liquidity position given all the current uncertainties within the global markets and economy. International news and events include the reductions in the European interest rate while the Federal Reserve Bank in the US kept the Fed rate unchanged coupled with ongoing international diplomatic tensions and continuation of trade tariffs as the 90-day tariff reprieve window the Trump administration announced draws to close. In the light of these developments key commodities like gold, oil, platinum, and coal offer vital insights into South Africa’s mining sector and inflation outlook for the coming months given all the mentioned international developments.

Monitoring these trends is crucial, as inflation expectations will influence the South African Reserve Bank’s (SARB) interest rate decisions later in 2025. A stable Rand and lower oil prices support favourable inflation forecasts, but global geopolitical tensions and potential changes to trade agreements like AGOA could cause rapid shifts.

With recent US tariffs and an unchanged Fed rate in May 2025, the Rand is expected to face continued volatility, impacting international markets and South Africa’s economic outlook for the remainder of 2025.

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Manufacturing Production

August 2025

In August, South Africa’s manufacturing output further declined by 1.5%, following a 1.3% decrease in July. This downturn was significantly below market expectations, which had forecasted a 0.3% increase for August. The Purchasing Managers’ Index (PMI) also fell by 1.4 points, from 50.8 in July to 49.5 in August 2025, indicating a less favourable business climate anticipated by manufacturers for the month.

Reviving South Africa’s Economy

A Balanced Path to Growth, Jobs, and Prosperity

South Africa faces significant economic challenges that threaten the nation’s stability and future prosperity. Over the past decade, sluggish growth, high unemployment—particularly among the youth—and infrastructure decay have become critical issues. These problems are compounded by inconsistent policies, energy shortages, and a prevailing uncertainty in the investment climate. The African National Congress (ANC) has recognised this urgency, unveiling a ten-point plan aimed at revitalising the economy. While this approach shows a concerted effort to address systemic issues, a complementary set of reforms proposed in the Alternative Economic Blueprint offers a promising pathway toward sustainable growth, job creation, and economic freedom.