South Africa’s Economic Outlook

Over the past 30 years, South Africa’s economic share in both Africa and the global arena has waned significantly. From contributing nearly 28% of the African GDP in 1994, this has dwindled to around 14% by 2024. Similarly, its share of the global economy declined from 0.54% to 0.37% over the same period. This decline is symptomatic of broader systemic issues, including poor policy frameworks, infrastructural decay, and insufficient investment in critical sectors, most notably manufacturing.

The manufacturing sector, a cornerstone for employment and economic stability, has suffered a disturbing decline of over 6% since the onset of the COVID-19 pandemic. Manufacturers report dwindling confidence levels due to weak demand and infrastructural inadequacies, with November 2025 reflecting a concerning 1.1% drop in production. Resolving these issues is essential, not only for recovery but for cultivating a competitive edge in both local and export markets.

Key to South Africa’s recovery is the renewal of the African Growth and Opportunity Act (AGOA), offering crucial trade benefits to South African exports to the United States. Despite the bill passing with bipartisan support in the US House of Representatives, uncertainty remains regarding South Africa’s eligibility due to strained diplomatic relations, particularly following recent geopolitical alignments. The recent imposition of tariffs by the US, including a new 25% tariff on countries engaging with Iran, adds another layer of complexity to these economic challenges.

Domestically, recent monetary policy adjustments reflect a responsive approach to changing economic conditions. With the South African Reserve Bank (SARB) likely to cut interest rates further, bolstered by a strengthened Rand against the US Dollar, lower inflation expectations and stable oil prices will support consumer spending and investment. These rate cuts signal a proactive stance amid global uncertainties, fostering a conducive environment for potential growth.

Furthermore, deteriorating relationships with key international partners highlight the importance of recalibrating diplomatic strategies. The military exercises between South Africa, China, and Russia—amidst ongoing US tensions—pause serious re-evaluation of the country’s position in the global trade landscape. The BRICS naval exercises in Simon’s Town, while strengthening ties with these nations, could trigger concerns in Washington, impacting trade agreements pivotal to South Africa’s economy.

A persistent threat looms in the form of an economic slowdown in China, which could devastate South Africa’s recovery trajectory. As a nation heavily reliant on trade, particularly with the global shift in commodity prices and demands, any downturn in the Chinese economy will resonate back home, risking another setback in growth rates and investment levels.

Amidst these challenges, it remains imperative for South Africa to solidify its economic foundations through structural reforms and enhanced international trade negotiations. Improved policies will be central to rebuilding the industrial capacity that has been in decline. Encouragingly, measures aimed at revitalising the manufacturing sector, alongside strategic investments in infrastructure, particularly in renewable energy, represent a chance for substantive growth.

In conclusion, while the prospects for growth in South Africa’s economy are beginning to stabilise, the trajectory remains fragile, shaped by both domestic and global events. By fostering a harmonised approach to policy reform and international relations, particularly with the US, South Africa can strive towards sustainable growth. This pivotal moment could lead to revitalisation and the reaffirmation of its position within the African and global economic landscape, signalling a desire for progress after years of stagnation.