On Balance - Economic Update June 2025
- Dr Roelof Botha
- Jul 8, 2025
- 3 min read
The downside
Statistics SA published South Africa’s GDP dataset for the first quarter of 2025 in June. Although year-on-year economic growth remained positive, the performance was disappointing, with a fifth successive GDP growth rate of less than one per cent being recorded. In the absence of a modest improvement in household consumption expenditure, positive growth would not have been possible, due to the continued demise of capital formation, especially in the area of infrastructure. This has contributed to a decline in the Afrimat Construction Index, which reflects the lethargy of building activity – a problem with its roots in state capture and now being exacerbated by the monetary authorities' refusal to cut indebted households some decent slack.
It should be a point of concern to the National Treasury that the Monetary Policy Committee (MPC) of the Reserve Bank has decided to focus only on one element of its policy mission statement, namely, curbing inflation. The other part (which is similar to the mission statements of virtually all central banks) is to encourage economic growth and employment creation. The MPC’s record for this key objective of monetary policy is a dismal failure. Unless interest rates start declining at a faster pace, South Africa will continue to experience suboptimal economic growth due to the excessively high cost of credit and capital.
The upside
Stellar performance of the rand
The US dollar continues to lose ground against most major currencies. During June, currency gains against the dollar were pretty modest, except for the Brazilian real, the Polish zloty, and the Euro, with South Africa’s currency also among the best performers. Since the beginning of the year, the rand has strengthened by almost 7% against the greenback. The US dollar index has slumped to its lowest level in three years, with analysts grappling with the question of whether this could be a structural weakness or merely a short-term glitch.
According to a note from Standard Chartered Bank, a temporary rally could occur if fiscal, monetary, or global trade policies change course. The note contends that most of the dollar’s decline since May is explained by tamer inflation readings and that the narrative of unrelenting structural selling of the dollar is inaccurate. In any event, a weaker dollar may be just what the US has been hoping for, due to its persistently high trade deficit.
The dollar’s recent weakness has undoubtedly been influenced by improved risk appetite across global markets, which has manifested itself in the rapid resurgence of stock markets, as the so-called trade war turned out to be less disruptive and subject to bilateral deals aimed at finding a degree of middle ground between the demands of the US and responses by the most affected countries and regions.
New vehicle sales surge in 2025
For the first half of the year, new-vehicle sales in South Africa amounted to 47,294 units – an increase of 18.7% compared with the same month last year, supported by an influx of affordable imported models. According to data released by the Automotive Business Council (known as Naamsa), it is clear that the growing impact of geopolitical and trade-related disruptions has not yet been felt too heavily in South Africa, with vehicle exports increasing by 7.9% in June to reach 36,343 units.
Naamsa notes that South Africa’s Automotive industry has long relied on thriving exports to sustain production volumes and attract investment into the sector. However, the current trade policy shifts, particularly from the US, pose a challenge to this model, which will require an urgent response by diversifying markets and expanding regional trade.
Welcome increase in platinum group metal prices
Following a fairly subdued first five months of the year, the prices of platinum group metals (PGMs) suddenly came to light in June. Between January 2 and July 2, the prices of platinum, palladium, rhodium, and ruthenium increased by 49%, 30%, 20%, and 63%, respectively.
South Africa is by far the world’s largest supplier of PGMs, which are critically important for the global energy transition (especially in the hydrogen economy).
Combined with platinum’s relatively more attractive affordability versus gold, the prospects for further price gains are favourable. This promises to be excellent news for the South African platinum mining industry.
On Balance by Dr Roelof Botha deliberately emphasises positive news, which often emphasises the resilience of the South African economy and the immense scope for new business opportunities.
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