Page 4 - Profmark BSA Guide 2025

OVERVIEW

The following are some of the key factors shaping South Africa’s current economic
climate:
Government of National Unity ("GNU")
After the GNU was formed during 2024, there was an atmosphere of hope and
confidence for the economy in South Africa. During the first half of 2025, however,
the feeling has been that the GNU has brought about a mixed impact on the
economy. While the GNU has fostered political stability and potentially boosted
business confidence, some economists warn that uncertainty surrounding the GNU
could negatively affect investor sentiment and economic growth.
Energy Security
Eskom’s commitment to ending load shedding has eased the strain on businesses.
In addition, the introduction of private sectors into the electricity market has further
increased stability and confidence.
Inflation & Interest Rates
The Consumer Price Index inflation rate dropped to 3.0% in November 2024,
presenting the opportunity for interest rate cuts, and on the 30th of January 2025,
the Monetary Policy Committee reduced the prime lending rate to 11.0%. Lower
borrowing costs for businesses and households could increase economic activity and
encourage investment.
Household Spending
According to statistics released by Statistics South Africa in January 2025,
households spend 76.0% of their income on housing, water, electricity, gas, food,
non-alcoholic beverages, transport, and insurance. With reduced interest and
inflation rates, households will have increased spending power to allow economic
growth.
Economic Growth
South Africa’s Gross Domestic Product is projected to grow at a modest
1.6%, indicating a slow yet positive recovery. This growth is dependent on the
implementation of policies that drive economic expansion and enable job creation.
Improvements in infrastructure, regulatory efficiencies and targeted sectoral
interventions could accelerate growth.
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