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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
August 12, 2025

Manufactuting Production

June 2025

In June 2025, South Africa’s manufacturing output increased by 1.9%, marginally exceeding market expectations of 1.8% for the month. Notably, the Purchasing Managers’ Index (PMI) saw a significant rise from 43.1 in May to 48.5 in June, suggesting an expected rebound in manufacturing activity for the month.

The food and beverages sector was a key driver of this growth, expanding by 6.0% and contributing 1.4 percentage points to the overall increase. Similarly, the petroleum, chemical, rubber, and plastics division grew by 1.9% year-on-year in June, adding a further 0.4 percentage points to the sector’s total output.

Seasonally adjusted retail sales increased by 2.4% month-on-month in June. For the second quarter ending in June, sales grew by 1.2% quarter-on-quarter. The largest contributor to this growth was the food and beverages division, which expanded by 3.3%, adding 0.8 percentage points. The motor vehicles, parts, and accessories division also saw a notable increase of 5.5%, contributing another 0.8 percentage points to quarterly growth.

Manufacturing remains a vital component of South Africa’s economy, employing approximately 1.6 million people and accounting for 12.5% of GDP in 2024. Employment figures rose slightly from 1.675 million in Q4 2024 to 1.677 million in Q1 2025, indicating a cautiously optimistic outlook supported by June’s production growth.

Despite these positive signs, business owners remain cautious, adopting a wait-and-see approach amid concerns over US tariffs on exports and ongoing US-China trade tensions. This caution is expected to intensify with the recent introduction of a 30% tariff on South African products entering the US market, effective from August 7, 2025. Nonetheless, companies continue to maintain substantial cash reserves, reflecting a prudent approach amidst current domestic and global economic uncertainties in the short to medium term.

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More Coverage

Gold and Foreign Exchange

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Private Sector Credit Extension (PSCE)

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In August 2025, credit demand grew by 5.9%, slightly below the anticipated market prediction of 6.0% for the month. Since the initiation of interest rate cuts in September 2024, there has been a noticeable acceleration in overall credit growth, with most subcategories showing increases, particularly in July.

Internation Trade and Trade Balance

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The Rand’s Journey Against the Dollar in 2025

Unpacking the Undervaluation and Economic Implications
As of October 2025, the South African Rand is trading at R17.15 against the US Dollar, a significant figure in the context of an estimated average exchange rate of R18.20 from January to September 2025. Market analyses leveraging the Purchase Power Parity (PPP) exchange rate – calculated using inflation differentials between South Africa and the US from 2020 to 2025 – indicate that the Rand remains undervalued. This disparity suggests an alignment closer to R14.30 in a conservative estimation and potentially as low as R11.30, revealing a risk premium embedded in the current forex dynamics.

Unlocking South Africa’s Potential

Bold and Radical Shift in Policies are required.
South Africa’s economy recorded modest growth of just 0.8% during the second quarter of 2025, continuing a pattern of sluggish expansion that has persisted over the past decade. With the economy still struggling to break free from its constraints, serious reforms and strategic policy adjustments are essential if South Africa is to achieve sustainable growth rates significantly higher than the current 0.8% average.
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