Positive Economic Signs Tempered by Job Market Concerns and Energy Fragility

January offered a mixed bag for the South African economy. While positive trends emerged in inflation, interest rates, GDP growth projections, and energy stability, persistent challenges in the labour market and lingering concerns about energy security and global uncertainties require careful consideration. This commentary analyses the key market movements and economic developments observed during the month.

Highlights in this article reveal:

• Equities Up, Led by Resources: Capped SWIX (+2.6%), FTSE/JSE All Share (+2.3%), Resources (+16.3%).
• Repo Rate Cut: SARB cuts by 25 bps to 7.5% due to low inflation (3.0%).
• Load Shedding Returns: Brief return highlights energy fragility.
• GDP Growth Revised Up: Forecasts exceed 2.3%.

The Capped SWIX rose by 2.6%, and the FTSE/JSE All Share Index increased by 2.3%. Bonds saw a modest gain of 0.4%, while the property ALPI index declined by 3.0%. Resources led sector gains, surging by 16.3% on the back of rising platinum, palladium, and gold prices. Industrials saw a slight increase of 0.5%, while Financials decreased by 2.9%. The rand appreciated by 1.1% against the US dollar, closing at R18.67. 

Inflation remained below the SARB’s target range, rising slightly to 3% year-on-year in December 2024. This allowed the SARB to reduce the repo rate by 25 basis points to 7.5%. However, two MPC members opposed the cut, citing risks from US trade policies. The R186 bond yield edged down to 8.2%. 

A significant milestone was achieved with 300 consecutive days without load shedding, boosting business confidence. This has led to upward revisions in GDP growth projections for 2025, with forecasts from Capital Economics, the World Bank, and others exceeding the National Treasury’s estimate. 

The World Bank also revised its forecast to 1.8%, highlighting logistics and energy stability as key drivers of growth.

Retail sales and mining demonstrated resilience, while manufacturing contracted, highlighting structural weaknesses. The South African PMI fell to 45.3, marking the third consecutive contraction in factory activity. 

Despite economic improvements, the labour market remains under pressure, with unemployment at 32.1%. Skill shortages are a major concern, particularly in high-demand areas like AI, robotics, and green energy. 

A survey revealed that 60% of South African employers consider skill shortages as a significant barrier to business transformation.

Despite the period of no load shedding, energy security remains fragile. A brief return of load shedding in January, following maintenance shutdowns, and Eskom’s proposed tariff hike underscore the economy’s vulnerability to Eskom’s operational challenges. The rand weakened in response to the renewed load shedding threat. 

About the South African Market Commentary 

The retrospective RisCura South African monthly Market Commentary, offers investors insights across key segments including the local markets and economic trends to gain clarity on economic indicators, asset performance, and market dynamics. Geared for informed investors, our insight into emerging markets empowers strategic decision-making in the dynamic South African market.  

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