Finding common ground

Economic growth firmed to 0,6% in the fourth quarter of 2024, benefitting from increased consumer spending and modest improvement in private sector fixed investment. This brings economic growth for 2024 to a paltry 0,6%. The current account narrowed over the fourth quarter, supported by an improved goods trade surplus, which benefitted from higher gold exports. Economic and survey data for the first quarter has thus far been mixed, with weaker survey data reflecting uncertainty related to US-SA tensions a cause for concern. The expulsion of Ebrahim Rasool, South Africa’s ambassador to the US, escalated tensions between the countries. The Department of Transport launched a formal process, including an online platform, to encourage private sector participation. Transnet agreed above inflation wages with unions over the next three years.

Headline inflation for the year to February 2025 printed at 3,2%, steady from the previous month and below market expectations. Core inflation decreased to 3,4%. Housing and utilities still made the most significant contribution to the headline figure, while medical insurance caused upward pressure over the month. Despite an increase over the month, food inflation remains benign at 1,9%. The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) kept the bank’s key lending rate unchanged, in line with expectations. Four members voted in favour hold, while two favoured a cut. The accompanying statement highlighted a contained inflation outlook and outlined the impact of various scenarios such as the loss of AGOA benefits and weaker US growth.

 

Finance minister, Enoch Godongwana tabled a revised version of the Budget 2025. The commitment to fiscal consolidation remained a priority, however, revenue measures in the form of taxes still featured prominently. The most notable changes included increases in VAT of 0,5% in 2025 and 2026 and no inflationary relief for salary bands, often referred to as bracket creep. With the approval process of the Budget 2025 resting on a meeting of minds between GNU partners, uncertainty remained as an overhang. The FTSE/JSE All Bond Index gained a modest 0,7% over the quarter. The Rand demonstrated resilience over the quarter, appreciating by a 3,0% against the weaker US dollar, although lost ground against a stronger Euro, depreciating by 1,5%.

Local equity markets delivered positive results in the first quarter, with the FTSE/JSE All Share gaining 3,6%. Strong quarterly returns from resources (33,7%) was the primary contributor. Precious metals gained 58,5% over Q1, with gold and platinum producers galvanising a strong start to the year. Tencent (19,2%) benefitted from the Chinese technology rally over the quarter, with Naspers and Prosus gaining 8,3% and 12,4% respectively.