The events of the past week made history, with Trump imposing trade tariffs on the whole world and SA’s budget passed late.
It was a week for the history books on the economic front this week, with two main events dominating headlines: the National Assembly voting in Budget 2025 without the DA on Wednesday and US President Donald Trump announcing tariffs of 31% on all imports from South Africa.
Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research, says it was a week for the history books. “There are many cliches you could use to sum up this week, but you do not want to underplay its significance by joking about it – although some of the jokes do write themselves.”
She says although the certainty adopting Budget 2025 brings (for now) is welcome, the concern shifts to the future of the government of national unity (GNU). “On top of this, it was an eventful week on the global front too. Liberation Day in the US sent shock waves through financial markets, with the reciprocal tariffs announced by US president Donald Trump being much more severe than expected (or hoped for).”
IJssel de Schepper says it feels a little pointless to put numbers to the potential economic impact of it all at this stage. “Financial markets will need some time to settle, with South African assets hit by global whims and local developments at the same time, while the US may backtrack on some of the announcements – or invade Greenland while they are at it. Beyond the direct trade impact and the consequent impact on production, sentiment has taken a serious knock.”
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Commodities sees gold dip
Turning to the effect of all this on commodities, Bianca Botes, director at Citadel Global, says after steady gains throughout the week, gold could not escape the tariff-induced volatility unscathed. “In Thursday’s trading, the precious metal achieved a new high of $3,167.84/ounce only to lose $113.
“However, pricing was later restored to above the $3,100 level. Gold ended the day relatively flat at $3,115.27/ounce and ended Friday on $3039.65.”
In addition, the Bloomberg Industrial Metals Index (BCOMIN) fell 5.09% over the last five days to 145.4, led by copper’s trend reversal after a strong uptick since the end of February. Copper futures fell below $5/pound on Thursday, settling at $4.815/pound. Despite the pullback, copper has still notched a 20% gain on a year-to-date basis.
Botes also points out that further pressure on oil prices came from an unexpected announcement by the expanded Organisation of Petroleum Exporting Countries, OPEC+, which plans to hike its output by 411 000 barrels per day in May. Also, demand concerns from Wednesday’s reciprocal tariff announcement weighed on Brent crude oil futures, which closed at $70.14/barrel.
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Rand falls again due to Trump tariffs and tense budget vote
She says the rand responded to the US tariff debacle and homegrown issues after a tense parliamentary vote on Budget 2025’s fiscal framework, depreciated to R19.08/$ from R18.47/$ after the tariff announcement.
Isaac Matshego and Busisiwe Nkonki, economists at the Nedbank Group Economic Unit, say the uncertainty over the impact of the evolving trade war on US and world trade hit emerging market assets this week.
“The rand slumped to its lowest level since the first week of February 2025. The unit is trading around R19.01/$ this morning, down from R18.30 on 31 March and R18.70 yesterday. The US dollar also depreciated across the board, eroding all its gains accumulated after Trump’s election win was confirmed in the first week of November.”
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PMIs remained in contractionary territory
The Absa PMI increased by 4 points from 44.7 in February to 48.7 in March. Although this marks the fifth consecutive month in contractionary territory for the local factory sector, it represents the mildest contraction in the period and the highest reading since 52.6 in October, Nadia Matulich, economist at the BER, says.
The S&P Global PMI edged down from 49 in February to 48.3 in March, recording a fourth straight month of contraction. Matulich says the March PMIs reflect conditions before Trump’s tariffs were announced.
“How this will play out remains to be seen, but the heightened uncertainty and volatility are clearly unhelpful and may undermine the recent uptick in exports.”
Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say although the manufacturing PMI improved slightly in March, it remained below the neutral mark for the fifth consecutive month and suggests continuation of subdued activity in the manufacturing sector.
“Concerningly, manufacturers are becoming progressively less optimistic about the near-term outlook and trade tensions, rising local political uncertainty and the impact this will have on confidence in the reform agenda as well as the rand, will likely worsen conditions.”
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Trade balance rebounded
According to Sars, February’s trade balance recorded a surplus of R20.9 billion, a marked turnaround from the R16.8 billion shortfall in January. Exports increased by R15.4 billion in February, driven by gold, as well as both goods and passenger vehicles.
Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say they expect the trade surplus to be lower this year than in 2024, leading to a slightly wider current account deficit of 0.9% of GDP compared to 0.6% last year.
Matshego and Nkonki say that over the year, exports and imports slowed, with imports slipping into contraction territory. “The trade outlook looks more pessimistic after the US announced new tariffs. South Africa faces direct and indirect impacts from these tariffs.
“South Africa exports to the US could slow as their prices become less competitive, reducing demand. Additionally, the imposition of tariffs in other key economies, which are important trade partners for South Africa could face weaker growth prospects, dampening their demand for South African exports.
“This, combined with a muted global growth outlook, suggests South African exports could be weaker than initially expected, lagging behind imports. However, the drag on exports could be contained by more reliable electricity supply, slightly smoother logistics and sustained demand for gold amid ongoing geopolitical uncertainty.
“Imports may continue to rise due to stronger consumer spending and a modest recovery in fixed investment.”
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New vehicle sales looking good for exports
The Naamsa vehicle sales figures for March bode well for exports going forward, alongside steady domestic sales. Domestic new vehicle sales were up 12.5% y-o-y in March, while exports increased by 31.1%.
Matshego and Nkonki point out that total commercial vehicle sales fell by a milder 5.6% from a 10.1% contraction in January, while increased sales of heavy commercial vehicles were offset by a contraction in light commercials.
“Car exports were 9 354 more than last year, reflecting a 31.1% increase, while passenger vehicle exports increased by 7.1% and exports of commercial vehicles more than doubled, totalling 14 676 units.”
Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano point out that demand for passenger vehicles has been supported by interest rate cuts and improving consumer finances. “The latest increase is also likely to have been bolstered by pre-purchases ahead of the forthcoming VAT rate hike.
“While growth in new passenger vehicles is expected to continue, it is likely to be constrained by the VAT increase unless dealers offer incentives to stimulate sales.”
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Credit growth slows down
The South African Reserve Bank’s latest snapshot of money and banking statistics show that private sector credit rose by 3.68% in February from 4.59% in January, while the (M3) money supply grew by 6.05% from 5 477 billion to 5 461 billion.
Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say these trends reflect the still restrictive interest rate environment affecting household demand and supply for credit.
However, Matshego and Nkonki believe that muted inflation and an improved growth and employment outlook should bolster consumer confidence, allow lenders to ease credit standards, and encourage growth in the coming months.
“On the corporate front, credit growth will likely remain volatile and relatively weak as fixed investment remains patchy.”
