South Africa Economic Outlook - November 2024
Economic outlook for 2025 is mixed for South Africa’s key trade and investment partners
Johannesburg, 27 November 2024 — As 2024 winds down and businesses turn their attention to next year, the outlook for the South African economy in 2025 comes into focus. The country’s economic fortunes are intertwined with the rest of the world. While domestic factors (such as load-shedding, interest rates and extreme weather events) have a direct impact on the country’s economic outlook, so too does the economic health of its trade and investment partners.
The latest edition of PwC’s South African Economic Outlook reviews the economic prospects for key developed economies and emerging markets in 2025. We also look at the trend of slowbalisation (reverse globalisation) where countries are looking closer to home for trading partners.
“The economic and geopolitical developments in the world’s largest economies, including the US, China, UK, Eurozone and India, have a direct impact on the decision-making by business executives in these countries. This, in turn, impacts their decisions around trade with, and investment in, South Africa.”
PwC US’s Pulse Survey October 2024 found that half of the US executives polled expect to make more foreign investments under the new administration led by President-elect Donald Trump. Some 50% of our survey respondents indicated that their company would increase foreign investments under a Trump presidency while 9% indicated they would decrease offshore investment—a net reading of 41%. This is good news for South Africa considering that the US is its fourth-largest source of investment after the UK, Netherlands and Belgium.
On a negative note for South African trade prospects, President-elect Donald Trump has suggested imposing a 10%-20% universal tariff on imports, aiming to create a more competitive pricing environment for US-based suppliers of these commodities. Metals and ores (including platinum, aluminium and ferro alloys) sourced from countries like South Africa, and used as manufacturing inputs in the US, are amongst the key risk categories for increased import tariffs.
With great uncertainty about the US economy in 2025, the economic outlook for Group of Seven (G7) developed economies[1] in 2025 shows modest growth across key territories. In the Eurozone, real GDP growth is forecast by PwC’s Global Economy Watch Projections October 2024 at a modest 1.2% next year. Germany, for example, currently faces difficulties from low consumer confidence and decreased demand for exports to China. The UK, in turn, is dealing with persistent inflation, high interest rates, and continued post-Brexit adjustments. In France, the manufacturing sector—a key employer—faces challenges from global supply chain disruptions and frequent labour strikes that reduce productivity.
South Africa’s largest sources of foreign investment (US, UK and Germany) are entering 2025 with mixed fortunes. This requires South African companies to shine their shoes and put their best foot forward to attract or stimulate foreign investment interest that could be less forthcoming than before. Potential investors want South African companies to show 1) a track record of commercial sustainability across the systemic crises the country has experienced (e.g. load-shedding, transport issues, etc.); 2) that they are well positioned to maintain their performance into the future; and 3) that they have capabilities that can be exported to other territories.
Elsewhere, the Emerging Seven (E7) economies[2] will grow at a notably faster pace (4.2%) in 2025 compared to developed economies (1.6%). India, for example, remains one of the world’s fastest-growing economies, with projected growth of 6.8% in 2024 and 6.6% in 2025 on the back of strong domestic demand and investment in key sectors that continue to support economic expansion.
“India has a diverse and rapidly expanding economic relationship with South Africa. As the Asian country progressed from a developing nation to an economic powerhouse, the market provided abundant and unexplored opportunities for South African businesses. India’s economy is growing at a fast pace and its membership along with South Africa of the BRICS grouping underscores the vast potential that these two regional powerhouses share to cooperate in commerce and investment.”
China (the world’s second-largest economy and South Africa’s largest trading partner) is expected to see slower economic growth next year, declining from 4.8% in 2024 to 4.5% in 2025. This is due to ongoing structural reforms, weak consumer spending and overcapacity challenges in the property market. Structural reforms aim to reduce debt reliance and stabilise the real estate market. However, these adjustments are expected to negatively affect or reduce short-term economic growth. While high-tech manufacturing continues to perform well, consumer spending and industrial output are weakening heading into 2025.
For South African companies, opportunities in Asia are tied into the hunger for commodities to feed, clothe, transport, etc. a combined 2.9 billion people in India and China. Both economies also have a ferocious appetite for commodities that are also used in their massive manufacturing industries, including minerals, metals and agricultural products. Under the banner of an expanded BRICS grouping, China and India remain the largest prizes for companies in other emerging markets seeking to expand their current footprint.
South Africa is a trade-dependent economy: the value of its goods and services trade was equal to 66% of GDP in 2023 compared to a global average of 63%. Globally, international trade has historically been with close neighbours, but globalisation since the 1980s reduced the importance of distance. PwC’s Megatrends research has highlighted a shift towards ‘slowbalisation’ over the past decade, where countries focus on national resilience by nearshoring and onshoring production.
“Global trade entered a new phase in the late-2010s called ‘slowbalisation’. It is a combination of onshoring or nearshoring certain sectors of the economy and friend-shoring some other sectors by gradually aligning supply chains to countries sharing similar economic, political and institutional systems. This kind of trade realignment could be impactful on local economic activity. South Africa is a small and trade-dependent economy exposed to global geopolitical forces beyond its control.”
By our estimates, the trade-weighted average distance between South Africa and its top 20 trading partners declined from 7,093km in 2022 to 6,874km in 2023—the lowest since 2012. The smaller reading last year was due to Mozambique jumping from being the 12th-largest trading partner in 2022 to fourth-largest in 2023. South Africa exported 66% more chromium ore (by value) to the country last year for shipping to China and other Asian buyers via the Port of Maputo, and imported 17% more electricity from the Cahora Bassa Dam hydroelectric power plant to aid in reducing load-shedding. South Africa’s increased dependency on Mozambique to supply port and energy services does speak to the trend of nearshoring, i.e. the outsourcing of services to a nearby country.
Key contents in this report include:
- Trump presidency: US executives expect to make more foreign investments—this could benefit South Africa
- G7 outlook: Developed-market trading partners and sources of FDI are entering 2025 with mixed fortunes
- E7 prospects: Emerging markets will see high levels of GDP growth in 2025 versus domestic trends
- Reverse globalisation: Nearshoring increases as international trade moves closer to home
- How PwC’s Global Economics Network (GEN) helps clients understand regional and country-level economic developments.
[1] Canada, France, Germany, Italy, Japan, US and UK.
[2] Brazil, China, India, Indonesia, Mexico, Russia and Türkiye
