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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
July 9, 2025

South African

Gold and Foreign Exchange Reserves

May 2025

The South African International Liquidity Position, represented by Net Gold and Foreign Exchange Reserves, increased in USD terms but slightly declined in Rand terms due to the Rand’s appreciation against the Dollar in June 2025. The Rand strengthened by nearly 30 cents against the Dollar in June, following a 60-cent appreciation in the previous month. Reserves rose by approximately $412 million, following a nearly $500 million increase in May 2025. This growth was partly driven by a 40.6% year-over-year increase in gold prices in June 2025 compared to the same month in 2024.

Foreign reserves in Dollar terms also increased from May to June, reflecting the Reserve Bank’s strategy to purchase more Dollars to bolster South Africa’s international liquidity amid current global market uncertainties. This approach is also influenced by the impending expiration of trade tariff exemptions related to “Liberation Day,” which are set to expire on August 1, 2025.

Key commodities such as gold, oil, platinum, and coal provide important insights into South Africa’s mining sector and inflation outlook. These trends will be vital in assessing inflation prospects amid international developments and potential trade restrictions with the US at the end of July.

Monitoring these movements is essential, 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. However, ongoing global geopolitical tensions and potential changes to trade agreements like AGOA could lead to rapid market shifts.

With recent US tariffs and the Federal Reserve holding interest rates steady in May 2025, the Rand is expected to experience continued volatility, impacting both international markets and South Africa’s economic outlook for the remainder of 2025.

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More Coverage

Producer Price Inflation

October 2025
In October 2025, producer price inflation rose to 2.9%, an increase from 2.3% in September. However, on a monthly basis, there was a slight decline in producer prices, down by 0.1%.

Retail Sales Performance

September 2025
Retail sales in South Africa rose by 3.1% in September, slightly exceeding market expectations of 3.0%, as anticipated by analysts for that month. This growth indicates a continuing recovery in consumer demand within the economy.

SARB Lowers Interest Rates as Stability Improves

The South African Reserve Bank (SARB) has taken a prudent and measured step by reducing its base interest rate from 7.0% to 6.75%, marking a significant moment in the country’s monetary policy trajectory. This decision, made by the Monetary Policy Committee (MPC), underscores the bank’s cautious optimism about South Africa’s economic outlook amidst a complex global backdrop.

Consumer Inflation

October 2025
In September 2025, the Consumer Price Index (CPI) saw a modest rise to 3.4%, slightly up from 3.3% in August, yet just below the analysts’ forecast of 3.5%.

Why Aluma does not Force an Interest Cut

Cautious Optimism Amidst Inflation and Reform Momentum
As the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) prepares to announce its interest rate decision later this week, market watchers are closely divided between expectations of a modest cut and maintaining the status quo. With approximately 70% of economists foreseeing a 25-basis point reduction from 7.00% to 6.75%, the prevailing sentiment reflects confidence in economic stabilization. However, a significant proportion remain cautious, suggesting that the SARB may choose to hold interest rates unchanged for another month, given the current inflation trajectory and recent developments in fiscal discipline.
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