Citadel: SA should prioritize local economic growth despite Trump's return

South Africa is facing a critical year for economic progress, as it navigates global uncertainties and local challenges to strengthen its economy. With inflation under control, the South African Reserve Bank (SARB) is expected to lower interest rates, offering some economic relief. However, risks like market volatility stemming from Trump-era policies and a strong dollar may pose challenges for emerging markets. To shed light on South Africa's economic prospects amidst these global uncertainties, Mike van der Westhuizen, Portfolio Manager at Citadel, joined CNBC Africa for an insightful discussion. Van der Westhuizen commended the recent positive changes in South Africa, particularly in the energy sector. He highlighted the importance of energy security in attracting businesses, especially in the manufacturing sector, which has great growth potential. The improvements in Transnet's ports and rail systems are also promising, with initiatives like using locally-built locomotives for coal transportation showing progress. However, he noted that Transnet requires significant funding to address budgetary gaps, underscoring the need for continued investment in infrastructure. Despite a projected economic growth rate of 1.8%, there are discussions about potentially reaching a 3% growth rate. Achieving this ambitious target would entail enhancing energy security, revitalizing the manufacturing sector, and fostering growth across various industries. Van der Westhuizen emphasized the importance of a 'make South Africa great again' mindset akin to the 'make America great again' initiative to drive sustainable economic growth. Looking ahead to the Monetary Policy Committee (MPC) meeting, expectations for a 25 basis point rate cut were expressed. With favorable inflation trends and global central banks cutting rates, the SARB is likely to follow suit to support economic growth. However, Van der Westhuizen highlighted the need for caution, as inflation may rise moderately in the future. The potential shift in anchoring the inflation target from 4.5% to 3% will be a key consideration for the MPC. In the global context, central banks are adopting divergent policies, with the US Federal Reserve expected to hold rates steady despite initial expectations of a cutting cycle. The European Central Bank (ECB) is anticipated to cut rates, reflecting economic challenges in Europe. Meanwhile, Japan is facing inflationary pressures, leading to potential rate hikes. The varying policies of major central banks are likely to impact currency markets and contribute to market volatility. Furthermore, the recent market reaction to China's DeepSeek AI model has raised concerns, particularly affecting US tech stocks. The AI company's innovation has sparked both excitement and apprehension in the market, with repercussions for semiconductor stocks like Nvidia. Van der Westhuizen suggested that the market reaction may have been exaggerated, considering the pre-existing concerns about stretched valuations in the AI sector. Nonetheless, the development underscores the ongoing trade tensions between the US and China, adding a new dimension to the geopolitical landscape. As South Africa charts its path towards economic growth amidst these complexities, fostering stability, implementing sound policies, and investing in key sectors will be essential. By addressing energy security, infrastructure challenges, and governance issues, South Africa can bolster its economy and navigate the turbulent global economic environment.