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
Consumer inflation below target range again
The consumer price index (CPI) resumed declining in March, mainly due to producer price inflation (PPI) remaining at historic lows. In March, the CPI recorded an annualised rate of increase of 2.7%, with no fewer than six of the items in the consumption expenditure basket in negative territory. The PPI for March also declined from the February figure and is now at a level of 0.5% – exactly the same as its average rate of increase over the past seven months.
The fact that both these two benchmarks of inflation are below the Reserve Bank’s target for inflation (3% – 6%) confirms the dire need for a more accommodating monetary policy. The underlying cause of extremely low inflation is a lack of demand in the economy, as illustrated by the high and rising level of unutilised capacity in the country’s manufacturing sector.
South Africa’s economic policy priority should shift from curbing inflation to encouraging demand via lowering the cost of credit and of capital investment – a view that is shared by many business leaders and millions of indebted households.
Household finances boosted by surrenders
The results of the Altron FinTech Household Resilience Index (AFHRI) for the fourth quarter of 2024 confirm a modest improvement in the financial disposition of South African households. This was mainly due to three cuts (of 25 basis points each) in the repo rate between September 2024 and January 2025. This led to the lowering of the prime overdraft rate from a record high of 11.75% to 11% currently. As with the third quarter reading of the AFHRI, the latest results need to take cognisance of the spike in the indicators for long-term insurance surrenders and lump-sum pension withdrawals.
These results have been influenced by the two-pot retirement system, which commenced in the third quarter of 2024 and has led to a significant increase in retirement fund withdrawals, to the detriment of longer-term financial security.
Other indicators that have assisted the positive trend of the AFHRI include:
- Private sector employment increased and at a higher level than before Covid
- Real levels of labour remuneration in the private sector have increased (both on a quarter-on-quarter and year-on-year basis)
- The higher value for unit trust assets (which serves as a proxy for the net asset value of companies listed on the JSE) may well provide a boost to the levels of collateral required by households when applying for credit
Trade war hits oil and fuel prices
The ongoing trade war between the US and China has given South African motorists something to smile about. Due to global uncertainty over the ultimate impact of sharp tariff increases between the world’s two largest economies (and also the two largest oil consumers), oil prices have been heading south at a rate of knots.
Between mid-January and the end of April, the price of Brent crude oil has fallen by 24%, which is likely to facilitate further fuel price declines. Further declines may be expected due to a dramatic slowdown in trade between the US and China.
According to a report in The Business Times, trade between the two countries has slowed to a semi-embargo type flow. In addition, commodity market analysts are predicting a further acceleration of output by members of the Organisation of the Petroleum Exporting Countries and allies (OPEC+).
The growing imbalance between the demand and supply of oil was triggered by one of President Donald Trump’s election slogans, “drill baby, drill”, with the American Petroleum Institute indicating a continuous rise in US oil inventories. Although President Trump may still revise some of the aggressive tariffs on imports into the US, the majority of economists in a Reuters poll believe the global economy will slip into recession this year, which would mean further bad news for oil producers.
South Africa shines in annual FDI survey
The annual Kearney FDI Competitiveness Index has provided some good news for South Africa’s prospects of attracting foreign direct investment (FDI). This survey (amongst global business executives by Kearney) ranks markets that are likely to attract the most investment in the next three years. In 2024, South Africa made a notable jump from 11th to seventh position. This may be attributed in part to the stabilisation of its energy supply since 2024, when previously habitual power cuts (loadshedding) started to diminish significantly.
Furthermore, investors continue to show interest in South Africa’s vast natural resources and expectations of a stronger economic performance in 2025 and beyond.
Natural resource endowment remains one of the most favoured attributes for attracting investor attention, and South Africa still possesses logistics infrastructure that is superior to many developing countries.
The imminent upgrading and expansion of South Africa’s roads, railways and harbours is expected to enhance the country’s ability to secure FDI over the medium term. Viewed against the background of a consistent increase in FDI over the past two decades, the Kearney survey results are not surprising.
