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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
May 26, 2025

A view on Demand in the Economy

Retail Sales Performance

March 2025

Retail sales in South Africa increased by 1.5% in March, falling short of the market expectation of 2.0%. This modest growth indicates a slower-than-expected recovery in consumer demand since late 2024, particularly following a weak economic starting point earlier in the year.

The South African Chamber of Commerce and Industry (SACCI) reported a decline in the Business Confidence Index, which dropped from 125.8 points in February to 123.5 in March. Additionally, the FNB/BER consumer index for the first quarter of 2025 fell sharply from -6 to -20 points, reflecting increasing consumer caution. Despite low inflation levels and an interest rate cut by the South African Reserve Bank in January 2025, these factors continue to have a limited positive impact on consumer spending.

Key contributors to the small rise in retail sales included:

  • Pharmaceuticals, medical goods, cosmetics, and toiletries: up 7.1%, contributing 0.5 percentage points.
  • Textiles and Clothing: increased by 3.5%, adding another 0.5 percentage points.

This growth during March 2025 suggests some positive momentum, although at a slower pace than initially anticipated. The interest rate cuts implemented from September 2024 to January 2025 appear to have eased household financial pressures, leading to a gradual recovery in demand. Maintaining this momentum through the rest of 2024 and into 2025 will be vital, as consumer demand remains a key driver of economic growth and job creation in South Africa. A potential interest rate reduction at the end of May 2025 could further support demand in the near term.

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More Coverage

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.

Gold and Foreign Exchange

September 2025
The South African International Liquidity Position, measured by Net Gold and Foreign Exchange Reserves, showed growth in both USD and Rand terms for September 2025.

Private Sector Credit Extension (PSCE)

August 2025
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

August 2025
International trade measures South Africa’s demand for foreign goods and services relative to its demand for domestically produced products in the global market.
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