The SA Reserve Bank has warned that a combination of adverse global trade shocks — specifically, the scrapping of a preferential trade deal, the imposition of new tariffs and a weakening rand — could shave nearly 0.7% off SA’s GDP growth rate, should its most severe downside scenario materialise.
The Bank forecasts GDP growth to rise to 1.7% in 2025.
The Bank’s warning raises the stakes for President Cyril Ramaphosa to reset diplomatic ties with the US. It detailed this grim prospect in its April monetary policy review on Tuesday, painting a picture of an economy caught in a destabilising tug of war between global trade winds and domestic vulnerabilities.
The review came a day after Ramaphosa picked MTN chair and former finance minister Mcebisi Jonas as special envoy to the US, which is widely expected to scrap the African Growth & Opportunity Act (Agoa) and has put on hold a 31% tariff on SA exports.
Diplomatic relations between SA and the US are at a low after the US administration kicked out ambassador Ebrahim Rasool last month, while Trump has accused SA of human rights violations, saying the country is persecuting white Afrikaners and confiscating land.
Still, Jonas’ comments during a 2020 address at the Ahmed Kathrada Foundation annual lecture, warning that Trump embodied a dangerous wave of populist nationalism, have the potential to complicate his mission to reset SA relations with the US and make the Bank’s harshest scenario play out.
While GDP growth is forecast to rise to 1.7% in 2025, potential growth is expected to strengthen to 1.4%.
Actual and potential growth are expected to converge over the medium term, averaging 1.9% per year.
In its worst-case scenario, the Bank modelled the potential termination of Agoa, the imposition of a 25% blanket tariff on SA exports and a 15% depreciation in the rand. It said these factors would drive inflation nearly one percentage point higher and trigger a 1.24 percentage point spike in the repo rate. The compounded effect could reduce the GDP growth rate projected under this scenario by 0.69%.
“Rising global tariffs and possible countervailing measures present risks to the outlook for global growth and inflation, threatening deeper stagflation,” the Bank noted in the review. “With such high global policy uncertainty and risks, confidence about how the medium-term outlook will play out is reduced.”
The Bank also explored a less severe scenario involving the termination of Agoa without retaliatory tariffs. That resulted in a modest 0.04% decline in the projected real GDP growth rate, with little change to inflation or the repo rate.
In another model, the termination of Agoa was coupled with the full imposition of a 25% blanket tariff. This combination cut 0.23% from the projected GDP growth rate while reducing inflation by 0.04 percentage points and the repo rate by 0.08 percentage points.
“We assume that the tariffs are going to be permanent,” said Theo Janse van Rensburg, head of macro forecasting in the Bank’s economic research department.
He added that 7.5% of SA’s exports go to the US, with only 25% of those benefiting from Agoa — making the effect of its termination relatively small.
However, Chris Loewald, head of the Economic Research Department, noted that these were not permanent reductions in growth, just the maximum effect. “The affects then wear off over time.”
Dollar depreciation
A more positive scenario assumed a 5% depreciation of the dollar against the euro and a 10% rise in global commodity prices.
This environment modestly lifts SA’s growth to 1.83% in 2025, compared to the baseline of 1.66%, with further gains in 2026 and 2027.
Headline inflation eases marginally to 3.54% in 2025 and continues to decline thereafter, while repo rates also dip slightly below baseline projections — except in 2027, where they rise marginally above expectations.
For Ramaphosa, the monetary policy review scenarios heap pressure on Jonas — who had described Trump as a “racist, homophobic right-winger”— to deliver on his mandate even as his remarks in 2020 cast a shadow on his mission to reset diplomatic relations with the US.
With such high global policy uncertainty and risks, confidence around how the medium-term outlook will play out is reduced.
— SA Reserve Bank in its April monetary policy review report
Jonas’ remarks, though not unusual at the time as they echoed those made by several Western leaders during Trump’s first term, may carry fresh diplomatic weight in the tensions between SA and the US.
Jonas is tasked with picking up where Rasool — declared persona non grata less than three months into the role — left off as well as advancing “diplomatic, trade and bilateral priorities” according to the presidency.
In a statement, Jonas said there are areas of commonality and mutual interest between the two countries, even as he acknowledged the antagonistic stance the Trump administration has taken towards SA.
Trump’s tariffs against SA exports are part of a wider global blitz to rebalance what his administration deems as an unfair international trade order. It has raised concerns about the outlook for global inflation.
“Tariff-related price increases remain a major upside risk to the global inflation outlook,” the Bank said.
The Bank revealed it has moved monetary policy closer to neutral, after a series of interest rate cuts that have helped ease inflationary pressures.
However, it emphasised that the path ahead remains highly uncertain, explaining why it's approaching further easing with caution — mindful that earlier price shocks, including fuel, food and electricity, could still filter through to wages and services.
The Bank cautioned that rising domestic and global risks — including tariff shocks, VAT increases and persistent services inflation — could reignite price pressures and complicate the disinflation trend.
While risks were “balanced” in November 2024, they tilted to the upside by January 2025, the Bank said. By March, several had materialised, prompting a more guarded stance.
Correction: April 16 2025
This article is being republished to reflect that GDP will not contract, but the projected growth rate will slow down in each projected scenario. It has also been updated with comments from Chris Loewald, head of the Economic Research Department at the Reserve Bank for extra clarity. Business Day regrets the error.
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