Last week, much of the discussion in South Africa, both in the media and private conversations, revolved around the actions of the Trump administration against the country.
Concerns centred on the potential non-renewal of the African Growth and Opportunity Act (Agoa) privileges in September, the US boycott of the G20 summit in South Africa later this year, and the imposition of additional tariffs beyond the existing 25% duty on imported steel.
Economists and analysts have begun assessing the potential impact of these measures on South Africa’s economy, including possible job losses, a significant depreciation of the rand, the risk of a recession, and the withdrawal of billions in foreign investment and portfolio capital.
However, estimates suggest that losing Agoa benefits would have a relatively minor impact, with GDP expected to decline by only around 0.06%. This limited effect is largely due to the composition of South Africa’s exports and the fact that minerals and metals, which make up more than 50% of the country’s exports to the US. are excluded from Agoa Nonetheless, the imposition of tariffs on steel raises concerns that the Trump administration could introduce further restrictions beyond Agoa.
A study by the Brookings Institution last year indicated that, on a sectoral level, the most significant losses would be in food and beverages, with exports to the US projected to shrink by at least 16%. The transport sector is expected to decline by 13%, while the fruit and vegetable sector could see a 4.5% drop, and the leather and clothing industry may contract by 3.6%. These declines would likely result in substantial job losses.
Despite these concerns, South African financial markets continued to perform strongly. The JSE All Share Index recorded its third consecutive weekly gain, rising by 1.4% to a new record high of 88 717 points. Year-to-date, the index is up 4.5%, marking a 20.3% increase compared to a year ago. The Industrial 25 Index climbed 2.3% last week, while the Resources 10 and Precious Metals indices also saw gains.
Gold remains a key safe-haven asset, reaching a new record of $2,926 per ounce last Thursday before closing the week slightly lower at $2,904—still a $42 increase for the week. The strong interest in South African resource and precious metal stocks, coupled with a sharp rise in Naspers’ share price on Friday, contributed to a notable appreciation of the rand. Over the past week, the rand strengthened by 10 cents against the U.S. dollar, closing at R18.34/$ on Friday. This marks a 35-cent appreciation since the start of the year, with further gains expected as gold and platinum prices continue to rise.
Meanwhile, Brent crude oil prices remained stable at around $74 (R1 359) per barrel. The stronger rand helped reduce the under-recovery in fuel prices, with petrol now under-recovered by only 13 cents per litre and diesel by 7c, compared to 60c and 72c, respectively, a week ago.
Looking ahead, Statistics South Africa (Stats SA) will release the country’s unemployment rate for quarter four 2024 tomorrow, with expectations of an increase from 32.1% to 32.4%. This will be a key topic when the Minister of Finance delivers the annual National Budget speech on Wednesday. Market focus will be on four key aspects: the National Treasury’s economic growth forecast for the next three years, projected income and expenditure, the anticipated budget deficit after tax adjustments, and the expected debt-to-GDP ratio along with deficit financing strategies.
On Wednesday, Stats SA will also release the inflation rate for January, expected to rise to 3.2% from 3.0% in December 2024, along with retail sales data for December. Internationally, the US Federal Reserve will publish the minutes of its January Federal Open Market Committee meeting, Japan will release its latest inflation figures, and the UK will report its retail sales for January.
Chris Harmse is the consulting economist of Sequoia Capital Management and a senior lecturer at Stadio Higher Education.
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