Captains of industry believe the domestic economy is on the path to recovery. The operations of Eskom and Transnet are being fixed, and more interest rate cuts are expected in 2025.
South Africa’s prominent CEOs are overwhelmingly optimistic about the country’s prospects in 2025, with some billing the year as one of “economic stability and recovery” after a long period of volatility, stagnation and pessimistic sentiments.
A recovery in the performance of South Africa’s economy is expected from 2025, the cost of living is likely to ease for long-suffering consumers and businesses, and pro-growth and investment reforms are expected to continue under the government of national unity (GNU).
Daily Maverick canvassed the views of heavy-hitting CEOs, including Nedbank’s Jason Quinn, MTN’s Ralph Mupita, Pam Golding Properties’ Andrew Golding and Woolworths’ Roy Bagattini to gauge their sentiments towards South Africa.
The general feedback from the CEOs was that the country is heading for calmer waters in 2025 because, for the first time in a long time, they can begin to imagine the economy growing by between 1.5% and 3% on the highly optimistic side. These growth projections are significant because apart from in 2021, when Covid-19 lockdowns eased and the economy opened, the last time the country’s economy expanded by more than 2% was in 2013.
The economy grew by 1.9% in 2022 and 0.7% in 2023, and is expected to average about 1% in 2024. This paltry growth underscores that the economy is still broken in many areas, even though sentiment among CEOs is starting to improve.
Real economic growth is important because, in a high-growth environment, CEOs tend to become more positive and confident, and invest more money in the economy, which can also create much-needed jobs.
Although improvements are expected in 2025 relative to 2024, MTN’s Mupita, who expects economic growth to be about 2.1% during the coming year, said much higher economic growth is needed consistently for meaningful impact. “We need to get growth into the 3% to 5% range to have a real impact on inclusive growth,” he said. CEOs have modelled that if the economy were to consistently grow above 3% in the coming years, at least one million jobs would be created by 2030 and make a dent in the joblessness crisis.
What’s driving the optimism?
The formation of the GNU after the May 2024 general election seems to have provided the foundation for the burst of optimism. The GNU, led by President Cyril Ramaphosa, is committed to respect for the Constitution, rule of law, holding the line on government expenditure and hitting fiscal targets (mainly reducing public debt), and implementing business-friendly policies. The GNU is also partnering with the private sector to keep up the government’s reform momentum to tackle crime and corruption, fix the country’s freight rail and ports in the hands of state-owned transport group Transnet, and ensure the continued cessation of Eskom load shedding.
Eskom and Transnet reforms
For Mupita, the fading of load shedding for more than eight months has been a game-changer. “The more stable power grid and sustained periods of no load shedding [are] supporting the economy at large,” he said.
At Eskom, there is now a renewed focus on monitoring the performance of power stations, which has resulted in no load shedding. After 17 years of SA being energy-insecure, Eskom has predicted a permanent end to load shedding by March 2025. However, this depends on several factors, mainly improving Eskom’s generating capacity. This capacity would improve with the return online of units at power stations including Medupi (Unit 4), Kusile (Unit 6), and Koeberg (Unit 2) in the coming months.
The private sector is working to deliver about 22GW (22,000MW) of renewable energy in the coming years, which would also contribute to ending the electricity crisis.
Woolworths’ Bagattini said load shedding (or the lack of it) was one of the biggest factors affecting consumer behaviour in 2024, with shopping preferences moving from prepared foods to food that you can put in the freezer. “Now consumers are able to stock pantries and freezers, where previously they didn’t know from day to day if they would have electricity to keep their stove or fridge operational,” he said.
Victoria Reuvers, managing director of Morningstar Investment Management, notes that improvement in load shedding has not even filtered through to business earnings yet. “Should we remain in an environment of no load shedding, you are likely to see an uptick in both company earnings and GDP growth, which will ultimately be favourable for our local market,” she said.
Reuvers added that the last decade saw an “incredibly tough” environment for South African businesses. “Any South African-focused business that has managed to survive has demonstrated not only resilience but also a business model that can be sustained in an environment of low growth and real headwinds. As we see the environment shift and become more favourable, we believe this area of the market is poised to capitalise on these changes and generate good returns for investors,” she told Daily Maverick.
The Transnet headwind
Transnet is another sore point for the economy and the country’s prosperity. Nedbank’s Quinn is optimistic about the ongoing reforms at Transnet, judging from the state-owned entity’s partnerships with the private sector, especially regarding its port operations. Transnet has signed 25-year contracts with private sector companies that will operate and upgrade its ports in Cape Town and Durban to improve their efficiency and competitiveness.
“Therefore, operational efficiency at the major ports [is likely to] improve further and unlock the logistical constraints that have held back export volumes. The better operational environment will benefit the overall economy to gain momentum,” said Quinn.
Transnet is also partnering with private sector players, set to run trains for a set period independently. However, there is a realisation from CEOs that it will take a long time to reform Transnet’s logistics operations and for the entity’s turnaround to have positive spinoffs for the broader economy.
Consumer affordability
Consumers and businesses are in for some respite from interest rates in 2025. The consumer inflation rate has fallen in 2024 –from highs of 5.6% seen in February to below 3% by November. The consensus from most economists is that the inflation rate is set to average 4.5% in 2025, which is the midpoint of the Reserve Bank’s target range of 3% to 6%. The bank has consistently argued that it would be aggressive in cutting interest rates if the inflation rate remains at the 4.5% midpoint for a sustained period.
Quinn said the inflation rate is now “subdued” and this will probably pave the way for further interest rate cuts in 2025, over and above the two cuts delivered by the Reserve Bank in 2024. Nedbank expects three cuts in the first half of 2025, with the prime lending rate (interest rate charged by banks) expected to drop from 11.25% to 10.5%.
“However, the number of cuts will depend highly on global developments, particularly the looming trade wars and their impact on international and local inflation,” he said.
Regardless, an expected prime lending rate of 10.5% compared with highs of 11.75% during the Covid lockdown will provide much-needed relief to consumers and businesses, who have also been hit hard by high food, fuel and electricity prices.
Bagattini expressed optimism, noting that the drop in interest rates and reducing inflation bodes well for the consumer and consequently the retail sector going into 2025.
Commenting on the impact of fast fashion from the likes of Shein and Temu, he acknowledged that South African retailers are going to have to develop an approach to either mitigate or adapt to these competitive forces. Bagattini says credit card data shows that Shein and Temu are turning around about a million transactions a month. However, moving into 2025, with a lower interest rate and reduced inflation, the hope is that consumers will recognise that fast fashion is cheaper for a reason and will turn back to shopping for value rather than price.
The housing market outlook
A sector that is likely to benefit from low interest rates and improved consumer affordability is residential property.
Pam Golding Properties’ chief executive, Andrew Golding, has already seen renewed activity in South Africa’s housing market after the Reserve Bank delivered two combined interest rate cuts of 0.5% during 2024. Golding said he has seen increasing inquiries for and uptakes of properties by buyers, particularly in the lower to middle sectors of the housing market, where homes are not priced at more than R2-million.
Underscoring the renewed activity is that November was a busy month for Pam Golding Properties, with Golding saying that the company has seen a 19% increase in concluded housing sales compared with November 2023.
“Furthermore, the banks continue to support the market with competitively priced loans, lower deposits and elevated approval rates,” said Golding. In other words, commercial banks are still keen to grant prospective home buyers 100% mortgage loans at low interest rates.
Many existing homeowners across South Africa have felt pain, as their homes have become investment duds. According to data from FNB, house price growth has languished to 16-year lows.
Since 2023, the inflation rate has grown faster than house price growth, meaning that existing homeowners have barely made money from their homes or experienced capital appreciation. However, some provinces and specific areas in the Western Cape, Limpopo, Free State, Eastern Cape and eastern and southern parts of Gauteng are showing good house price growth.
Said Golding: “Fuelled by … demand for homes among young, first-time buyers and those relocating for a host of lifestyle and other reasons, and coupled with lower interest rates and increased market confidence, there remain sound opportunities offering value-for-money property acquisitions in regions and areas around the country.”
Golding is optimistic that house prices nationwide will start recovering in 2025. His optimism has been informed by Pam Golding Properties’ internal data, which has indicated a reversal in the malaise of house prices from October 2024. The Pam Golding Residential Property Index recorded house price growth of 5% in October 2024 compared with consumer price inflation of 2.8% during the period.
This translates to real growth (after inflation is stripped out) of 2.2% in October, the second consecutive month of real growth, as an increase of 0.9% was also seen in September 2024.
Although the outlook for 2025 is rosy, there are factors outside South Africa’s control that might ruin the country’s positive momentum. A second Donald Trump presidency in the US might result in trade and tariff wars with many countries including South Africa. The rand might weaken against major currencies and international oil prices might increase, undermining South Africa’s economic growth prospects and interest-rate-cutting cycle. DM
Ray Mahlaka is a Business Maverick associate editor; Neesa Moodley is editor of Business Maverick.
This story first appeared in our weekly DM168 newspaper, available countrywide for R35.
