Economic Update November 2025

The downside

The extravagant media publicity surrounding South Africa's hosting of the 2025 G20 Summit in Johannesburg has masked the reality of a country in desperate need to grow its economy at rates commensurate with lowering an alarmingly high unemployment rate. Although several potholes and traffic lights were fixed in haste, the glaringly obvious infrastructure decay in the country's business epicentre requires urgent remedial action. No municipality in the country can match the efficiency of local government in the Western Cape, and a blueprint to restore the functionality of basic services is overdue.

Engineering sector executives have repeatedly warned that South Africa's infrastructure recovery will continue to stall unless government, industry and professional bodies work in tandem to move from repeatedly identifying problem areas to concrete implementation. At a recent roundtable discussion in Johannesburg, hosted by engineering firm Gibb, the speakers warned that policy paralysis, a shrinking skills base, and a lack of measurable accountability were preventing the country from reversing infrastructure deterioration and restoring broad-based economic stability.

Regrettably, the National Treasury appears to have yielded to the unduly hawkish Monetary Policy Committee by lowering the Reserve Bank's inflation target range. This has dampened the prospect of further rate cuts should the consumer price index (CPI) rise, as it is already within touching distance of the upper end of the implicit new inflation target range of 3% to 4%. Any significant depreciation of the rand exchange rate is therefore destined to halt the MPC's rate-cutting cycle.

The upside 

GDP recovers in the third quarter

Early in December, Statistics SA released the third-quarter GDP figures, which showed a welcome return to real GDP growth above the zero-to-one per cent range (year-on-year). No doubt the lower cost of credit has played an essential role in securing positive real per capita growth for the first time since the second quarter of 2023.

GDP recovers in the third quarter

In the absence of a sterling performance by three key sectors over the past six years, positive GDP growth would not have been possible, as illustrated by the figure. The most significant contributor to output, namely finance, real estate & business services, remains the mainstay of the South African economy and has grown its share of GDP from 20.2% to 27.1% over the past two decades.

Growth prospects for 2026 have improved, driven by a sound balance of payments, enhanced investor confidence, and stronger public finances in South Africa. National Treasury is confident it will secure a second consecutive primary budget surplus in the current fiscal year (revenue minus non-interest expenditure).

Prime rate declines to 10.25%

The Monetary Policy Committee (MPC) of the Reserve Bank resumed its rate-cutting cycle at the end of November, with the sixth successive drop in the repo rate, which automatically leads to a similar change in the country's benchmark prime overdraft rate. The prime rate is now 10.25%, compared to 11.75% at the beginning of September last year.

Prime rate declines to 10.25%

The move was widely welcomed and prompted a media statement from the national government, which said a lower interest rate provides much-needed relief for South African households, many of whom continue to face financial pressure due to the rising cost of living.

Note that the current prime rate remains higher than before the 2020 COVID-19 lockdowns and is still 325 basis points above the rate in October 2021. Further interest rate cuts are necessary to provide additional stimulus to consumer demand, which will feed through to higher GDP growth and support the critical goal of creating jobs.

Household finances improve

The results of the Altron FinTech Household Resilience Index (AFHRI) for the second quarter of 2025 were released at the end of November, showing a healthy year-on-year improvement of 2.3%. This index, which captures 20 indicators that directly or indirectly affect households' income-generating capacity, was under pressure from the end of 2021 through mid-2024 due to the Reserve Bank's restrictive monetary policy stance. Since then, modest declines in the prime rate have assisted the AFHRI's recovery, whilst the impact of the two-pot system has also provided some relief for households. Significantly, both employment levels and salaries in the private sector improved during the first half of the year, albeit only marginally.

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On Balance, by Dr Roelof Botha, deliberately emphasises positive news, which often highlights the resilience of the South African economy and the immense scope for new business opportunities.