SA could see Moody’s and Fitch revise their credit outlooks from “stable” to “positive” within the next six to 12 months, according to Old Mutual’s group chief economist Johann Els.
Speaking at the insurer’s 2025 economic outlook briefing last week, Els painted an optimistic picture of the country’s economic trajectory, citing improving fundamentals and a stabilising fiscal position.
Els said that 2025 could be SA’s best economic year in over a decade with stronger growth, continued low inflation and the possibility of further interest rate cuts.
“Perhaps only one [cut], but I think there’s room for two rate cuts,” Els said.
“The new CPI weights that will be introduced with January inflation numbers suggest somewhat downward bias to forecasts ... and therefore I think rates will likely be cut again.”
Stats SA postponed the CPI release by a week to next Wednesday, citing “the need for additional checks and verifications on the data and compilation systems to ensure that all updates are correctly implemented”.
Els’ forecast for economic growth in 2025 stands at 2.2%, up from 0.7% last year, and well above the country’s decade-long annual average of 1%.
He attributed this improvement to diminishing structural constraints, a fiscal consolidation drive, and growing private sector involvement in the economy.
While inflation is expected to drift higher in 2025, Els remains confident it will remain below 4% in the first half of the year and 4.5% in the second half.
“The current inflation environment in SA should negate some of the negatives coming from US policy and dollar strength,” he noted.
He noted S&P Global Ratings had already upgraded SA’s credit outlook from stable to positive in 2024, and expects Moody’s and Fitch to follow suit.
Els highlighted the significance of SA’s debt-to-GDP ratio, which is currently much lower than previous estimates by ratings agencies.
Despite global uncertainties — ranging from US monetary policy shifts to trade tensions — Els expects the rand to stabilise and strengthen over the year.
“The rand could potentially have a 17-handle by the end of this year, despite the negatives from a stronger dollar that impacts on other global currencies. The local factors should help the rand to stabilise and strengthen somewhat,” he said.
He added that reduced political uncertainty, improving confidence and better economic fundamentals had already helped the rand outperform several other emerging-market currencies since January 2024.
I think there's room for two rate cuts
— Johann Els, Old Mutual economist
Looking at the broader economic landscape, Els said many of SA’s past challenges — ranging from load-shedding to political instability — had started turning into economic tailwinds.
“No wonder growth has been so weak. But lots of those headwinds have started dying down to a large extent and turning into tailwinds, so negatives turning into positives. No load-shedding — the outlook there is improving. Even for Transnet, some of the volumes started picking up during the second half of last year,” he said.
He also cited the formation of the government of national unity (GNU) as a key turning point that has boosted political stability and investor confidence.
Els emphasised the crucial role of the private sector in accelerating SA’s growth, predicting that economic expansion could reach 3% in the coming years, though structural constraints such as labour regulations and the skills deficit would prevent it from hitting 5%-6%.
“The 3% is readily achievable through this bigger role of the private sector in the economy,” he said.
“This environment of better growth, continued low inflation and conservative budgets should create an environment of more positive outlook statements from the ratings agencies and within 12-18 months, actual upgrades,” he concluded.
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