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

Welcome removal from the grey list

South Africa’s removal from the so-called grey list of the Financial Action Task Force (FATF) at the end of October has been applauded by all and sundry, especially business leaders and the banking sector. The grey list refers to countries that have strategic deficiencies in their ability to counter money laundering and terrorist and proliferation financing. South Africa was added to this list in February 2023 and is one of only three G-20 countries to have been included, alongside Argentina and Turkey, both of which have since exited the list.

The National Treasury has received extensive plaudits for its role in overseeing the restoration of compliance with the institutional capacity to combat corruption and terror financing. A recurring theme in much of the commentary -including that from the Banking Association of South Africa – is the potential for improved investor confidence and evidence that the Government of National Unity (GNU) can deliver results in addressing the corruption that emerged during the state capture era.

A nod of approval was also received from capital markets, with South Africa’s ten-year bond yield continuing its declining trend and the rand strengthening by more than 9% against the US dollar since the beginning of the year (as at 31 October 2025).

October was a particularly good month for the GNU – a Team Europe investment package worth nearly €12-billion was announced on 9 October at the Global Gateway Forum in Brussels, Belgium. The EU, its member states and several development finance institutions are mobilising this investment package with South Africa, which will focus on the just energy transition, sustainable infrastructure, digital connectivity and pharmaceutical value chains in South Africa.

Improvement in the bank impairment ratio

Following a consistent increase in both the value of bank impairments (bad debts) and the ratio of impairments to total bank assets between the end of 2022 and the second quarter of 2024, a welcome reversal is now gaining traction. A combination of job losses during the Covid-19 pandemic and the subsequent restrictive monetary policy stance – which raised the prime overdraft rate to its highest level in 15 years – caused bank impairments to rise. They increased from a quarterly average of R153 billion in the first quarter of 2019 (pre-COVID, at constant 2025 prices) to R205 billion in June 2025.

Fortunately, a resumption of meaningful formal sector employment growth during 2022, combined with a lowering of the prime rate (via the repo rate), has led to a declining trend in the ratio between impairments and bank assets. The ratio has declined from 2.59% in the second quarter of 2024 to 2.42% in the second quarter of 2025.

The reciprocal of the real value of bank impairments represents one of the 20 indicators that comprise the Altron Fintech Household Resilience Index (AFHRI). The declining trend of this indicator has played its part in the recent recovery of the financial disposition of South African households. Hopefully, a more accommodating monetary policy stance will continue to strengthen the ability of the banking sector to provide credit to the economy. 

Recovery of home loan applications

The positive impact of the lower prime rate on the residential property market has been reflected in the third quarter data, underpinning the BetterBond Index of Home Loan Applications. In reaction to the five successive cuts of 25 basis points each in the Reserve Bank’s repo rate (which automatically feeds into the prime overdraft rate), this Index, which is compiled by one of South Africa’s largest mortgage bond originators, increased by 11.6% (quarter-on-quarter) and by 14.6% (year-on-year) during the third quarter of 2025.

Since bottoming out in the fourth quarter of 2023, the number of home loan applications has increased by 26%. This figure remains 15% lower than the first quarter of 2022, when the Reserve Bank started to follow a restrictive monetary policy stance and the prime rate eventually increased to a 15-year high of 11.75%. With inflation remaining at the bottom end of the Reserve Bank’s target range, more interest rate cuts seem possible before the end of the year.

Other good news emanating from the BetterBond Index data is the steady increase over the past four years in the approval ratio of bond applications. After having declined to 58.1% during the 12 months to September 2021, this ratio stood at 62.6% during the 12 months to September 2025. Another sign that South Africa’s residential property market may be on the verge of turning the corner is the recent increase in the average home purchase price to a new record high, breaching the level of R1,6 million for the first time (for transactions administered by BetterBond). The Western Cape leads the pack with an average home purchase price of R2.17 million for the 12 months to September 2025.

Boom time for hotels

Following the decimation of income by the commercial accommodation sector as a result of the Covid-19 lockdowns, South Africa’s hotels have recovered splendidly, with an average annual real increase in income of 61% since the first quarter of 2021. Although the comparable growth for guest houses and bed & breakfast establishments was lower (43%), both managed to outperform the average annual increase in the JSE all share index of 13% over this period (between 1 January 2021 and 31 October 2025).

The initial gradual recovery in the accommodation sector gained traction from the beginning of 2024, as both domestic and foreign travellers started to really enjoy the hospitality of South Africa’s hotels and guest houses. In the process, the JSE sector for travel & leisure has also outperformed the all-share index, increasing its index value by an average annual rate of 18%. Given the attractive dividend yields offered by companies in this sector, combined with relatively low price-earnings ratios, this is not surprising.

One of the key reasons for the stellar performance of income generated by hotels and other accommodation is related to the very high recovery rate for overseas travellers. During the first nine months of 2025, the top-five positions for origin countries remained the same as last year (the UK, the US, Germany, the Netherlands and France, in order of number of arrivals). Australia seems to be mounting a serious challenge for moving up the ranks, having leap-frogged past both the Netherlands and France for the month of September.