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.

Business confidence continues to improve

During the second half of 2024, the Business Confidence Index (BCI), compiled by the SA Chamber of Commerce and Industry (SACCI), continued with an upward trend that kicked in during the last quarter of 2023. The November reading of 118.1 was the highest since the damage inflicted on the country’s infrastructure during state capture became visible.

Business confidence has improved in leaps and bounds since the formation of the government of national unity, with the BCI improving by more than 10% since the May elections. According to the SACCI, the broader political representation in the national government has facilitated a positive assessment of economic prospects by the private sector.

Inward-bound tourism and the higher volume of merchandise exports had a notable positive effect in the November reading of the BCI, with no significant negative effect of any of the 14 sub-indices. The year-on-year increase in November was 6% – the largest year-on-year improvement for a single month since all of the Covid-19 restrictions were lifted. The BCI trend is aligned with movements in several other indicators of business and consumer confidence, including the Drive.co.za Motor Index, which jumped by 6% during the fourth quarter of 2024.

Further recovery of tourism

Following a bit of a slump during the winter months, tourist arrivals from overseas recovered well in the fourth quarter of 2024, with year-on-year growth of more than 8% being recorded in November and December.

The moderate to warm weather in the Western Cape played a key role in the further recovery of the tourism sector during the peak holiday season, as witnessed by the continued growth in tourist arrivals by air. Over the past decade, 65% more travellers landed at Cape Town airport, in sharp contrast to a decline of 7% in the number of tourists that flew to OR Tambo airport in Gauteng.

During 2024, an interesting shift occurred in the top-ten ranking of the major source countries for tourist arrivals in South Africa. Although the top-four positions remained the same (the UK, the US, Germany and the Netherlands, in order of arrivals), Australia has moved into position number five for the first time, leap-frogging France in the process. Canada has also swapped places with India to move into seventh place, whilst Italy has surpassed Switzerland to move into ninth place.

The latest World Tourism Barometer, published by United Nations Tourism, confirms the consolidation of international tourism recovery from one of its worst crises ever, four years after the outbreak of the COVID-19 pandemic. An estimated 1.4 billion international tourists (overnight visitors) were recorded around the world in 2024, an increase of 11% over 2023, with the industry expected to grow by between 3% and 5% in 2025.

Mining sector on the march

Thanks mainly to year-on-year price increases of 38% and 7%, respectively, for gold and platinum, South Africa’s export revenues from precious metals ended 2024 on a high note, contributing R377 billion to an eight successive annual trade surplus.

At the end of the third quarter, the mining sector’s contribution to total value added in the economy had also increased marginally, from 6.8% to 7%, whilst a total of 75,000 new jobs were added in the sector between the third quarter of 2023 and the third quarter of 2024.

Gold’s status as a so-called safe haven has been boosted by nervousness over the trade policies of the US under Pres Trump, combined with the hostilities in the Middle East, China’s military exercises near Taiwan and Russia’s war with Ukraine. The precious metal touched a new all-time high of $2,800 per fine ounce on 31 January. It is also encouraging to witness some upward momentum in the rate of capital formation in the mining sector, which could play a key role in lifting South Africa’s economic growth rate in 2025 and beyond.

Marginal improvement in household finances  

The results of the Altron FinTech Household Resilience Index (AFHRI) for the third quarter of 2024 were released at the end of January, confirming the continued financial pressure on South African households, mainly due to the high interest rates over the past three years, which have kept the average debt cost burden of households at its highest level in 15 years.

Although the recent lowering of the repo rate (and, as an inference, also the prime overdraft rate), has exerted a marginal positive impact on the AFHRI, the year-on-year improvement of 2.1% is, to a large extent, overshadowed by zero growth in the ratio of household income to debt and an index reading that remains lower than three years ago.

According to Johan Gellatly, MD of Altron Fintech, the latest AFHRI demonstrates that a further lowering of interest rates is essential for restoring household purchasing power and to stimulate economic growth in South Africa. An interesting observation from the third quarter reading of the Index is the large year-on-year increase in surrenders of long-term investments, triggered by the two-pot system.

The most significant positive trend amongst the 20 different indicators that comprise the AFHRI is the welcome increase in private sector employment and the marginal increase in average salaries paid by private sector firms. With a measure of consensus having developed over South Africa’s growth prospects in 2025, any further decline in the cost of credit and of capital is likely to lead to a larger measure of financial resilience amongst South African households.