Monthly macro and economic insights report

Our monthly To the Point column by economist Dr Roelof Botha offers in-depth analysis and commentary on the latest economic trends, market developments, and financial news. Designed to keep you informed and ahead of the curve, each edition delves into key economic indicators, explores their impact on global and local markets, and provides insights to help you navigate the ever-changing economic landscape.

Interest rate cut welcomed

The latest 25-basis-point interest rate cut by the Monetary Policy Committee (MPC) of the Reserve Bank has been welcomed by all and sundry, relieving the debt servicing burden of millions of households. The official bank rate is now 7%, with the prime overdraft rate at 10.5%, which remains 50 basis points higher than pre-pandemic levels. With the consumer price index at 3% (at the bottom point of the inflation target range) and the producer price index remaining at record-low levels (0.6% in July), the MPC’s decision was not surprising.

South Africa’s residential property market is bound to gain some traction as a result of the latest interest rate cut. Some real estate firms canvassed by Property24 have noted that more rate cuts would be required to lift the sector to the activity levels achieved before the start of the restrictive monetary policy stance between 2022 and the end of 2024.

According to Adrian Goslett, CEO of REMAX Southern Africa, the latest rate is a welcome step towards reinvigorating economic activity and restoring consumer confidence. It is also likely to serve as a much-needed catalyst for transaction volumes in the home-buying market, particularly in the affordable and mid-market sectors. A more growth-friendly policy stance is expected to assist with unlocking the pent-up demand in the housing market.

Manufacturing PMI expands again

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) for manufacturing moved into expansionary territory in July, after spending ten successive quarters below the neutral mark of 50. (A reading above 50 indicates increased activity, and below 50 equates to decreased activity). For most of the past three years, the index trend was inversely correlated to the rise in the prime overdraft rate (to its highest level in 15 years), and the latest move suggests a positive response to the modest easing of restrictive monetary policy.

The welcome increase in the PMI to 50.8 in July 2025 was mainly due to a recovery in demand, with new sales orders rising by 9.7 points to 55.9. Similarly encouraging was the continued expansionary level of the index tracking expected business conditions in six months’ time, although July witnessed a modest decline to a level of 56.4.

Despite the sub-index that tracks purchasing prices increasing marginally in July, the current level remains the second lowest in over eight years. This is more or less in line with the ultra-low annualised producer price index of less than 1%. Unfortunately, the employment index declined in July, reversing the gains made in June and returning to levels seen earlier in the year. This could be a signal that manufacturers are waiting to see a stronger recovery in demand before increasing employment. The latest decline in the prime overdraft rate may be just the trigger for a return to job creation during the second half of the year.

Rebound for mineral sales

South Africa’s mineral sales have enjoyed a splendid start to the second quarter of 2025, with April and May posting a 10% year-on-year increase over the same two months last year. The quarter-on-quarter increase for average monthly sales was even more impressive, with a gain of 24%.

May was a particularly profitable month for the country’s mining industry. The industry saw an average month-on-month increase in sales values of 14% for the so-called “big-four” – gold, platinum group metals, coal and iron ore. Should this trend continue, it bodes well for the National Treasury to surpass its revenue budget in the current fiscal year, which could well provide some leeway for larger expenditure on repairing the country’s infrastructure.

The table confirms the fact that rising prices have been largely responsible for the rebound in mineral sales values, although a higher level of efficiency at some of the key export harbours has also played its part.

Solid increase in summer grain harvest

In its July update for the country’s summer grain and oilseeds harvest, the Crop Estimates Committee of the Department of Agriculture, Forestry & Fisheries has provided encouraging news. The upwardly revised estimate is now 18.74 million tonnes (up 21% year-on-year). There is an annual uptick for maize and soybeans, mainly supported by favourable summer rains and sufficient areas planted. According to the Agriculture Business Chamber (Agbiz), this ample harvest will likely add downward pressure on prices, which bodes well for consumer food price inflation.

Until recently, the prolonged and irregular summer rains had raised concerns over the ability to harvest crops of an acceptable quality, but these fears have been largely allayed. Maize accounts for just above 15 million tonnes of the latest estimate. This is well above South Africa’s annual maize needs of approximately 12 million tonnes and retains the country’s status as a significant net exporter of maize.

Over the past 12 years, South Africa’s exports of agriculture and processed food and beverages have continued to surpass imports by a healthy margin. In the process, this sector has become the fourth largest contributor to the country’s foreign exchange earnings and has cemented its status as a strategic industry, also because of its indispensable role in employing almost one million people.