In a mixed outlook for South Africa, the Organisation for Economic Co-operation and Development (OECD) warns that South Africa's recovery from the US tariff regime will be slow, though two-pot pension system payouts will increase spending in the local economy.
The OECD report came in the same week that Stats SA said the economy grew by just 0.1% in the first quarter.
The report hails reforms South Africa has implemented in its network industries through Operation Vulindlela.
It says the country’s economic activity is projected to rise to 1.3% this year, and to 1.4% in 2026. While contractionary fiscal policy limits government spending, monetary policy easing and two-pot system withdrawals will enhance activity and consumption.
“Exports will gradually increase, affected by trade tensions. The pension reform, which eases access to retirement funds, will support consumption. Investment will benefit from lower interest rates. The increase in activity will help slightly lower the unemployment rate to about 32% in 2026,” the report says.
Earlier this year, US President Donald Trump imposed tariffs on steel and aluminium imports into the US, increasing them to 50% this week. He also announced “reciprocal” tariffs on countries, including South Africa, only to suspend them for three months.
The OECD report says reforms will ease bottlenecks in rail transport and ports, giving much-needed support to exports. Activity is projected to grow moderately during 2025 and 2026, limited by uncertainty.
“Reforms to state-owned logistics enterprise Transnet, as well as measures to increase competition and create the conditions to crowd in private sector investment, will continue to ease bottlenecks in rail transport and ports,” it says.
“However, trade tensions are heightening uncertainty. Exports will gradually increase, weighed on by the planned increase in tariffs on US imports. Inflation will ease in the second quarter of 2025, after the decline in global oil prices, but will strengthen during the second half of 2025 and in 2026, as activity strengthens.”
Deputy finance minister Ashor Sarupen said global trade tensions, inflation volatility and heightened policy uncertainty had made this a challenging environment for all open economies — and South Africa was no exception.
“South Africa’s growth is forecast at just 1.4% in 2025, with risks remaining firmly tilted to the downside. Over the medium term, growth is expected to average 1.6%, constrained by a weaker global outlook, persistent logistics constraints, and higher borrowing costs.”
Sarupen said the recent budget tabled by finance minister Enoch Godongwana highlighted a commitment to debt stabilisation at 77.4% of GDP in 2025/26, sustaining a primary budget surplus, and investment in the social wage as well as infrastructure.
“The launch of phase 2 of Operation Vulindlela is a step towards further accelerating structural reform. With a focus on digital infrastructure, dynamic cities and improved basic services, this work complements our broader strategy to build a capable state and reduce regulatory and infrastructure bottlenecks — priorities the OECD has rightly emphasised.”
The launch of phase 2 of Operation Vulindlela is a step towards further accelerating structural reform. With a focus on digital infrastructure, dynamic cities and improved basic services, this work complements our broader strategy to build a capable state and reduce regulatory and infrastructure bottlenecks — priorities the OECD has rightly emphasised.
Erik Peterson, MD of consulting firm Kearney’s global business policy council, said rising fragmentation could contribute to lower growth at a global level and cause a resurgence in inflation, as well as higher costs for consumers and businesses.
“Sharp escalations in protectionist trade measures — a reflection of such broader fragmentation — are creating economic headwinds. While such policies are often intended to build domestic resilience and protect strategic industries, they also carry downside risks.
“Implemented poorly, they can stifle competition, undermine productivity and trade growth, disrupt supply chains, lower investment and deepen the economic gap between emerging and advanced economies.”
Peterson said Kearney’s projections indicate that the Middle East and Africa will “edge” Asia and Australasia as the fastest-growing economic region in the world, maintaining steady growth amid global trade turmoil.
“Nevertheless, our baseline projections reflect downgraded prospects for the global output growth in the short term, amid rising complexities ... strategic leaders are fortifying their business for what lies ahead and pinpointing areas of opportunity,” he said.
This week, Stats SA announced that the local economy grew 0.1% in the first quarter of 2025. It noted that without a boost from agriculture, GDP would have contracted by 0.3% in the first quarter.
“Transport, storage and communication were the second-largest positive contributors, with gains recorded in land transport, air transport and transport support services. Consumer activity was stronger, with trade, catering and accommodation expanding by 0.5%. Retail trade, motor trade, accommodation and food and beverages contributed positively.”
A statement from Stats SA said mining and manufacturing were the biggest drags in the first quarter. Together, both industries shaved 0.4 of a percentage point off GDP growth, while mining weakened by 4.1%, with platinum group metals the most negative contributor.
“Coal, chromium ore, gold, copper and nickel also disappointed. Iron ore, manganese ore and diamonds recorded gains, but not enough to lift the industry into positive territory.”
Stats SA said manufacturing activity slowed on the back of weaker production levels for petroleum and chemicals, food and beverages, and motor vehicles and other transport equipment.
Three of the 10 manufacturing divisions experienced a favourable quarter, according to the latest monthly manufacturing release — including textiles and clothing; wood, paper and publishing; radio, television and communication; and professional equipment.
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