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Africa|Environment|Infrastructure|Power|Infrastructure
Africa|Environment|Infrastructure|Power|Infrastructure
africa|environment|infrastructure|power|infrastructure

South African economic growth could triple this year, Absa says

26th March 2025

By: Bloomberg

  

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South Africa looks set for much better growth in 2025 thanks to increased spending and investment, according to analysts at Absa Group, though a cooling of relations with the US may dim the outlook.

Africa’s most industrialized economy could expand by 2.1% this year, analysts at the Johannesburg-based lender said on Tuesday. That compares with the 1.7% expansion forecast by the central bank, up from 0.7% in 2024.

“Growth should be a lot better this year,” Absa economist Miyelani Maluleke told a media round table. Milder inflation and lower borrowing costs are boosting income, he said, while investment should rebound from the depressed levels of recent years. “Cyclical support factors and a stronger consumer environment are positive.”

South Africa’s economy has grown by less than 1% on average for the last decade, handicapped by mismanagement and corruption at state-run entities that snarled vital infrastructure and caused frequent power cuts.

Load-shedding, as electricity outages are locally known, has decreased sharply in the past 12 months and the formation of a broad coalition government after May elections boosted confidence, though that’s recently taken some strain.

An index of consumer sentiment fell to -20 in the three months through March from -6 in the previous quarter, FirstRand’s First National Bank said separately on Tuesday, citing worries about higher taxes and US relations. It was the lowest level since the second quarter of 2023.

US President Donald Trump has halted all federal funding to South Africa over false claims that the government is confiscating land. The nation hasn’t seized any private land since the end of apartheid in 1994.

The spat has fanned concern South Africa could lose preferential access to the US market through the African Growth and Opportunities Act (Agoa), which expires in September.

Absa estimates that excluding South Africa from Agoa would only have a limited direct impact, but the longer-term implications could be more serious if other trade tariffs were increased or foreign direct investment was hurt.

Domestically, the shine has come off the so-called government of national unity after its first budget was rejected by key coalition partners, who objected to a planned increase in value-added tax. A subsequent budget proposed a scaled-back VAT hike and negotiations are continuing.

While Absa sees positive momentum for the growth story, relations with Washington and potential domestic political strains that have surfaced with the budget are clearly risks.

“The big concerns are the uncertainty,” said Maluleke.

Edited by Bloomberg

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