Tawanda Karombo
High costs could inhibit benefits of high gold prices for South African producers of the precious metal although there is optimism that its auto makers will register growth this year, analysts at Fitch Solutions said on Wednesday, highlighting a mixed outlook for exports this year.
South Africa exports automobiles, metals and minerals as well as other manufactured products to markets such as Europe, China and the United States among others. With South Africa falling out with the US, analysts have been weighing up the impact of President Donald Trump’s tariffs.
Analysts at Fitch Solutions said on Wednesday that the US tariffs on South Africa would affect its agriculture and auto sectors the most.
“The country will face an effective tariff rate of 9.5% according to our calculations and this will likely impact sectors such as agriculture,” said Lara Wolfe, the head of Sub-Saharan Africa country risk for BMI, a Fitch Solutions company.
The US tariffs on South Africa were likely to “have an impact on the auto sector” although Fitch Solutions analysts were optimistic that the sector will register growth and recovery this year.
This is premised on improving incomes on the domestic market. Easing interest rates and falling inflation elsewhere across the world could also translate to additional discretionary income for consumers.
“Our autos team have maintained their expectations of growth for the sector in 2025 after contracting in 2024 on the back of improving incomes,” added Wolfe.
Overall, Fitch Solutions’ outlook for South Africa’s export sector was “somewhat mixed” with “softer growth in major trading partners such as the US and China (expected) to weigh” on demand.
The mining sector was predicted to have muted growth despite gold prices breaching highest ever levels above $3 500 per ounce.
“Our metals and mining team remains bearish about the mining sector despite high gold prices. High costs and a limited product pipeline will continue to weigh on the sector,” explained Wolfe.
In terms of household spending, the South African consumption outlook was likely to be characterised by slow inflation and accomodative monetary policy. This was all set to offer some relief to consumers and boost spending.
Fitch Solutions reckoned that there was “likely to be gradual recovery for the rand” while it has forecast average of 3.7% for inflation this year.
FNB senior economist Koketso Mano said on Wednenesday though that inflation will resume “a rising trend” from next month, the fuel price decline will continue to contain overall inflationary pressures.
The South Africa Reserve Bank was now expected to cut interest rates by two sets of 25 basis points in the second half of the current year, said Fitch Solutions, citing its analysts downgraded expectations on the inflation forecast.
There has been apprehension that South Africa’s government of national unity (GNU) could collapse, a development economists and analysts fear could spook investors and result in curtailed investment flows as well as tanking economic growth performance.
BMI has revised South Africa’s growth outlook for 2025 from 1.5 to 1.3%. Other economists believe that the trade fall-out between South Africa and the US will impact ecomic growth performance for this year.
The ANC and DA have been disagreeable on the budget, especially in relation to VAT increases. Wolfe said the GNU partners were likely to find a way forward despite the recent tensions.
“Our core view is that GNU will maintain its current structure despite recent tensions,” she said.
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