South Africa’s Economic Outlook 2025: A Reality Check on Growth and Challenges

South Africa enters 2025 with cautious optimism, as economists and analysts highlight potential growth opportunities. However, a closer look at economic indicators reveals that much of this positivity comes from a low base, and the country still faces significant hurdles.

BankservAfrica BETI: A Mixed Start to 2025

The BankservAfrica Economic Transactions Index (BETI), which tracks the value of all electronic transactions cleared through BankservAfrica at seasonally adjusted real prices, suggests the economy is in a state of stagnation. After a slight rebound in 2024, the index moved sideways in January 2025, indicating a slow start to the year.

Despite remaining above year-on-year levels, this growth is tempered by the fact that in early 2024, South Africa was still experiencing high levels of load shedding, making the current improvements relatively modest. On average, BETI increased by 1.7% in 2024 compared to a contraction of 0.5% in 2023.

“The index’s performance in 2024 reflects a gradual economic recovery. However, challenges such as the significant decline in agricultural sector value-add in Q3 impacted full-year growth, leading to an estimated economic growth of only 0.7% for 2024,” said Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.

Economic Indicators Signal Uncertainty

Several key economic indicators highlight the fragile nature of South Africa’s recovery:

• S&P Global South Africa Purchasing Managers’ Index (PMI) fell to 47.4 in January 2025, indicating contraction in private sector activity—the lowest level since July 2021.
• Manufacturing sector downturn: The Absa PMI dropped to 45.3, marking the third consecutive month of decline.
• Consumer spending: Retail and business transactions in January declined compared to December 2024, with the standardised nominal value of transactions dropping to R1.162 trillion from R1.448 trillion the previous month.
• Vehicle sales bright spot: Despite economic challenges, new vehicle sales surged by 10.4% year-on-year in January, signaling some improvement in consumer purchasing power.

Political and Global Risks Weigh on Growth

External factors, including global geopolitical tensions and shifting trade policies, add further uncertainty to South Africa’s economic prospects. The return of Donald Trump as U.S. President has already led to new import tariffs and trade policy shifts, including an executive order on aid to South Africa that has raised concerns.

Independent economist Elize Kruger warns that while South Africa’s economic recovery is still in motion, it is fragile. “The economy has essentially been treading water since May 2024. As we enter 2025, fresh drivers are needed to propel growth into a higher gear.”

Can South Africa Turn the Corner?

Looking ahead, structural reforms and planned infrastructure investments could provide a boost, but their impact will take time to materialize. South Africa’s real GDP growth is projected at 1.7% in 2025, but downside risks remain.

The business sector is looking for clearer policy direction and improved investor confidence to sustain momentum. While some industries, such as automotive and select manufacturing segments, are showing signs of resilience, the overall economic landscape remains challenging.

For South Africa to fully capitalize on its economic potential in 2025, it will require more than a cyclical upswing—it will need decisive policy action, strategic investments, and a stable global trade environment.