Assessing South Africa’s economic activity

South Africa's economic landscape is showing signs of both resilience and caution as the BankservAfrica Economic Transactions Index (BETI) remains a key indicator of the country's economic performance. The BETI, which tracks the value of all electronic transactions cleared through BankservAfrica, experienced a slight rebound last year after facing negative growth in 2023. Despite a flat movement in January 2025, the BETI is still above year-on-year levels, showcasing a mixed bag of economic activity in the region. Independent economist Elize Kruger delved into the details of the recent economic trends and highlighted some key factors shaping South Africa's economic outlook. With various factors at play, including structural reforms, global uncertainties, and interest rate dynamics, the path forward for South Africa's economy in 2025 is riddled with both potential growth and risks. The delicate balance between domestic drivers and external influences will play a crucial role in shaping the country's economic trajectory in the coming months. Here's a closer look at the key themes and insights discussed in the interview with Elize Kruger. The economist pointed out that the uptick of 1.7 percent in the BETI in 2024 reflected a gradual economic recovery in South Africa. However, the flat figure in January 2025 hinted at subdued economic activity, with certain sectors performing well while others faced challenges. For instance, vehicle sales saw a significant increase, but the manufacturing sector experienced further negative movements, painting a mixed picture of the overall economy's health. The BETI has been treading water since May of last year, albeit at elevated levels compared to recent history. Kruger attributed this to cyclical factors such as inflation moderation, interest rate cuts, and improved confidence levels post-elections. While these factors initially propelled economic activity, South Africa now finds itself at a plateau, necessitating fresh impetus to drive growth. Structural reforms in the pipeline offer a glimmer of hope, but looming geopolitical tensions and potential trade wars pose threats to the country's economic prospects. The economist highlighted the dual forces shaping South Africa's economic landscape in 2025. On one hand, domestic economic prospects, driven by structural reforms and cyclical upswings, could boost retail and investment activities. On the other hand, global uncertainties may dampen confidence levels and hinder overall economic growth. The delicate balance between these forces will determine the net impact on South Africa's economy in the foreseeable future. While the outlook for economic growth in 2025 appears positive, risks loom large on the horizon. A strong US dollar, volatile exchange rates, and escalating trade tensions pose significant challenges that could derail growth projections. Additionally, global interest rate dynamics and the impact of external events on South Africa's emerging market status add layers of complexity to the economic outlook. At the household level, the prospects of further interest rate cuts remain uncertain as global market conditions evolve. While South Africa's low inflation environment creates room for potential rate reductions, external factors may influence the central bank's decisions on future interest rate adjustments. Balancing the need for stimulus with global economic risks will be a key consideration for policymakers moving forward. Despite the uncertainties, Kruger remains cautiously optimistic about South Africa's economic growth prospects in 2025. The momentum in key sectors like retail, supported by low inflation and positive real wage increases, provides a glimmer of hope for sustained economic expansion. With the right balance of domestic reforms, global stability, and prudent monetary policies, South Africa can navigate the challenges ahead and steer its economy towards a path of sustainable growth and prosperity.