Latest news with #OxfordEconomicsAfrica
The Citizen
16-07-2025
- Business
- The Citizen
Retail sales: South Africans spent R19.6 billion on clothes and furniture in May
Consumers spend R87.5 billion on retail sales since the beginning of 2025 and mostly paid for their shopping with credit. South African consumers spent a whopping R19.6 billion in May on clothes and furniture, although momentum in the retail sector seems to be slowing. According to the retail trade sales numbers issued by Statistics SA today, retail trade sales, measured in real terms (constant 2019 prices), increased by 4.2% in May compared to May 2024. The largest positive contributors to this increase were retailers in textiles, clothing, footwear and leather goods (12.5%) and general dealers (3.6%). Seasonally adjusted retail trade sales increased by 0.1% in May compared to April after month-on-month changes of 1.1% in April and -0.3% in March. Retail trade sales increased by 3.5% in the three months ended May 2025 compared to the three months ended May 2024. ALSO READ: How Shoprite made R20 million profit per day But retail sales were flat for past three months The largest positive contributors to this increase were again retailers in textiles, clothing, footwear and leather goods (9.5%) and general dealers (2.8%). Seasonally adjusted retail trade sales were flat in the three months ended May 2025 compared to the previous three months. The largest negative contributors were retailers in food, beverages and tobacco in specialised stores (-2.2%) and textiles, clothing, footwear and leather goods (-0.4%). The largest positive contributors were all 'other' retailers (1.4%), retailers in hardware, paint and glass (0.7%) and general dealers (0.2%). This chart shows that consumer demand has strengthened since early 2024, thanks to lower interest rates and favourable inflation: ALSO READ: Index reveals consumers are willing to spend money, but not too much No surprises in retail sales for May Jee-A van der Linde, senior economist at Oxford Economics Africa, says there were no surprises in the retail sales numbers for May. 'South Africa's retail trade sales growth moderated in May in line with our expectations. 'We predict private consumption growth to remain a key driver of overall economic growth this year, underpinned by easier monetary policy and low inflation.' Van der Linde points out that momentum in the retail sector seems to be slowing, with sales of 4.2% in May compared to a year ago after the 7.0% recorded at the start of 2025. 'Although we expect consumption growth to moderate over the coming quarters, households will remain a key driver of overall economic growth this year, underpinned by easier monetary policy and low inflation. 'We forecast a 25 basis points interest rate cut in the third quarter, followed by another incremental cut in the first quarter of 2026. Meanwhile, consumer confidence recovered during the second quarter, with middle- and high-income households – the most sensitive to interest rate changes – posting the strongest quarterly improvements. 'This latest data release aligns with our view of subdued economic activity in the second quarter, and we continue to forecast real GDP growth of 0.8% this year.'
The Citizen
17-06-2025
- Business
- The Citizen
China's clever trade deal with Africa – removal of tariffs on most goods
While the US is alienating other countries with high import tariffs, China is making friends in Africa by scrapping most import tariffs. While the rest of the world is sidetracked with the unrest in the Middle East and US President Donald Trump's on-again, off-again import tariffs, China made a clever trade deal with Africa to remove tariffs on most African exports. This not only boosts its trade potential, it also expands Beijing's influence. Brendon Verster, economist at Oxford Economics Africa, says as the US retreats and turns its focus inward, China's economic incentives deepen ties, reinforcing it as Africa's key partner. 'This shift may weaken the US's leverage and reshape global alliances in China's favour, despite risks from its slowing economy.' Last week, China announced plans to eliminate all tariffs on imports from 53 African sovereign states it maintains diplomatic ties with. Eswatini is the only exception due to its recognition of Taiwan's sovereignty. The Changsha Declaration on Upholding Solidarity and Cooperation of the Global South advances the full implementation of the Beijing Declaration reached in September 2024, which in turn aims to 'jointly build an all-weather China-Africa community with a shared future for the new era,' Verster says. 'The move can be considered a push by Beijing to capitalise on the chaos caused by Trump's 'Liberation Day' tariffs. Although the agreement text does not mention him by name, it does note that the parties agree that the frequent occurrence of unilateralism, protectionism and economic bullying has created severe difficulties for the economic and social development and the improvement of livelihood in African countries and other developing countries.' ALSO READ: China risks its moral high ground in escalating trade tensions China rather wants to resolve disputes Verster points out that in addition, the declaration states that the parties 'call on all countries and the US in particular, to return to the right track of resolving trade disputes through consultation based on equality, respect and mutual benefit. 'The new zero-tariff pledge marks a pronounced expansion of China's previous trade policy announced last year, which removed tariffs on imports from 33 countries globally that are deemed the least developed. 'Moreover, the continent's most underdeveloped economies, which already have full access to the Chinese market, will receive additional assistance to bolster their exports. These include measures on market access, inspection and quarantine and customs clearance.' Before the latest announcement, Chinese trade already dominated across Africa. Among the continent's major economies, the Asian giant outstrips the US as an export destination by a significant margin, especially in the DRC, accounting for 66% of goods exports, Angola (46.4%), Zimbabwe (20.1%) and Zambia (18.7%). ALSO READ: China challenges Trump's economic 'bullying' US ahead of China in some African economies However, Verster says, the US is still ahead of China in several economies, such as in Lesotho, Mauritius, Morocco, Egypt, Nigeria and Kenya. He also points out that apart from trade, China is almost on par with the US in terms of foreign direct investment (FDI). According to the United Nations Conference on Trade and Development's 2023 World Investment Report, FDI inflows to Africa from the US totalled $45 billion in 2021, down from $50 billion in 2017. FDI inflows from China were recorded at $44 billion in 2021, slightly higher than the $43 billion registered in 2017. This chart shows how China's trade deal solidifies an already solid position as Africa's key trade partner: Source: International Trade Centre, *Includes Hong Kong ALSO READ: SA eyes boost in trade with China at November expo China's removal of tariffs has implications for power dynamics with US Verster says China's step to remove all tariffs on most African goods has important implications for the continent as well as the evolving power dynamics between the US and China. 'From a geopolitical standpoint, China's move is a long-term bet on African alignment and growth as well as a deepening of its commitment to South-South cooperation. 'The US has been moving away from these policies and China's removal of tariffs is part of a wider architecture that also includes concessional loans and large-scale infrastructure spending. As Washington turns its focus inward and its engagement in Africa becomes increasingly transactional or conditional, Beijing is stepping in to fill the void with consistent and unconditional economic incentives.' He says China is entrenching its position as Africa's most significant economic partner and expanding the continent's export potential. 'The strategic move significantly boosts China's soft power and trade leverage, especially given the US's decisions to tighten trade restrictions and cut development funding. 'African countries stand to gain from potential export diversification, increased foreign exchange earnings and closer integration into global value chains. Still, the Chinese economy is losing steam, which could weigh on its import demand.' ALSO READ: China welcomes Cyril – and tightens ties with 8 agreements Africa to become major player in critical minerals market Verster says Africa is also poised to become a major player in the critical minerals market as the world shifts to sustainable practices. 'Beijing's move could be considered an attempt to keep the continent close as the scramble for critical minerals ramps up and China seeks to assert its dominance over these supply chains.' As China's trade diplomacy cultivates closer bilateral ties, the broader implication is a gradual decline in US influence in Africa. Verster believes that African leaders might be more inclined to support China's viewpoints on the global stage, which would diminish Western influence. 'Furthermore, Western attempts to establish international trade regulations or impose sanctions may lose their effectiveness as African economies become more integrated with Chinese supply chains and trade networks. 'In short, Beijing's zero-tariff policy is not just a trade initiative but a strategic manoeuvre to reshape its alliances with Africa, reduce the US's leverage and embed China more deeply in the African continent's economic and political future.'
TimesLIVE
12-06-2025
- Business
- TimesLIVE
Kenya's budget to weigh revenue growth against public outrage
Kenya's finance minister will present a budget on Thursday aimed at boosting revenues to service debt while avoiding tax measures that triggered the kind of deadly protests that rocked East Africa's biggest economy last year. President William Ruto's administration has been struggling to narrow the fiscal deficit and govern under a heavy total debt-to-GDP ratio of about two-thirds, well above the 55% level considered a sustainable threshold. The government is seeking new sources of funding after last year's countrywide protests forced it to pursue austerity measures and scrap planned tax hikes worth more than 346 billion Kenyan shillings ($2.7bn). 'Kenyans cannot bear more tax,' finance minister John Mbadi said on Wednesday. 'For the first time, we have not added taxes in the current finance bill as has been the case before.' Critics have accused the government of using the budget to increase indirect taxes and infringe on privacy by empowering the tax authority to spy on people's bank accounts and mobile money transactions. But Mbadi said on Wednesday the revenue authority must be empowered to collect taxes to run the country. In place of hiking individual taxes, Mbadi is looking to widen the tax base, improve compliance and cut spending, said John Kuria, a tax specialist and partner at Kody Africa. 'They understand that people are not very happy, especially with the government and how the taxes are being used,' Kuria said. Despite government attempts to tighten expenditure and crack down on fraud, 'I think we're still going to have a significant funding shortfall,' he said. While the proposed budget outlines credible measures to reduce the fiscal deficit, the challenge lies in implementation, which Kenya has struggled with historically, said Shani Smit-Lengton, senior economist at Oxford Economics Africa. This often results in midyear revisions through supplementary budgets, which erode fiscal credibility, Smit-Lengton told Reuters via email. Kenya said in March it had applied for a new lending programme from the International Monetary Fund (IMF) after abandoning the final review on the previous IMF programme. In February it joined a fast-growing club of African nations that have gone to the market to borrow cash to pay off maturing debts in a bid to smooth out liabilities and ring-fence critical expenditures like health. 'This year, the stakes are higher: the government must demonstrate improved budget discipline to bolster its case for a new IMF programme, while also managing public sentiment to avoid social unrest. 'Achieving this balance will be critical to maintaining both investor confidence and domestic stability,' Smit-Lengton said, adding that the government's target of reducing the fiscal deficit to 4.5% in the next financial year was overly optimistic.
The Citizen
03-06-2025
- Business
- The Citizen
No fireworks expected, but GDP figures are disappointing — economists
Despite high hopes for improved GDP in 2025, the picture of the first quarter GDP does not offer much hope for economic growth. Economists expected no fireworks from the GDP figures for the first quarter of the year, but they all agree that the growth of 0.1% is disappointing. They even wonder if expecting economic growth of 1% is already a stretch, as the economy was drifting from slow growth to virtually no growth. Jee-A van der Linde, senior economist at Oxford Economics Africa, says the South African economy continued to trend sideways at the start of 2025. 'The latest data print does not fundamentally alter our view of gradual economic growth in 2025, but we acknowledge increasing downside risk to our forecast. 'Unless there is a stronger pickup in economic growth during the rest of this year, 1% real gross domestic product (GDP) growth for 2025 seems like a stretch at this point. The moderation in household consumption was broadly in line with our expectations, with the recent interest rate cut not expected to provide a meaningful boost in the second quarter. 'In addition, the lacklustre investment performance reflects South Africa's incoherent policies. Considering the uncertainty stemming from domestic politics and US tariffs during the second quarter, we anticipate private sector investment will remain depressed in the near term.' Van der Linde points out that the impact of US tariffs will start to reflect in the data for the second quarter, with exports likely to show strain heading into the second half of 2025. 'These circumstances make it challenging for businesses to ramp up investment and expand their operations. The next quarter's GDP figures are unlikely to look much better.' ALSO READ: GDP grew marginally in first quarter – agriculture helped keep economy afloat Disappointing GDP, although higher than market expectations Maarten Ackerman, chief economist and advisory partner at Citadel, also views the GDP growth as disappointing, although it outperformed market expectations of a 0.1% contraction. However, he says the marginal improvement is 'nothing to celebrate', as the economy remains stuck in a protracted low-growth cycle. 'This print brings the full-year growth to just 0.8%, still well below 1% and less than half the rate of the population growth. This confirms that South Africa continues to experience a per capita recession.' He points out that agriculture remained the standout performer, growing nearly 16% in the first quarter, following 17% growth in the previous quarter. 'Despite being a small sector, agriculture is one of the fastest-growing industries and critical for job creation. Its resilience is noteworthy given the ongoing political, logistical and climate-related challenges.' With household consumption increasing by only 0.4%, Ackerman says it is a slowdown from the previous quarter, which benefited from withdrawals linked to the two-pot retirement system. He notes that while the recent interest rate cut may support consumer spending, it is concerning that consumption remains the economy's only reliable growth driver. 'This latest GDP figure paints a familiar picture: a few resilient sectors keeping the economy afloat, while structural underperformance holds us back. Without meaningful and coordinated reform, the economy will continue to limp along, unable to meaningfully reduce unemployment or address pressing social challenges.' ALSO READ: Outlook for first quarter GDP not great – economy probably contracted Low inflation and repo rate cuts should support household spending Thanda Sithole, senior economist at FNB, says today's GDP figure is in line with their 1.3% growth forecast for 2025. 'While high-frequency indicators for 2Q25 were mixed, with new vehicle sales still showing robust growth, manufacturing PMI continues to disappoint, remaining in contractionary territory for the seventh consecutive month. 'This suggests ongoing pressure on the manufacturing sector, which carries significant weight in the economy and is likely to continue weighing on near-term growth. Business confidence survey results for the second quarter will be released later this week and should provide a clearer indication of how firms view current operating conditions.' She points out that business confidence is crucial for fixed investment, growth and employment. 'Encouragingly, inflation remains benign and the South African Reserve Bank (Sarb) reduced the restrictiveness of monetary policy by a cumulative 100 basis points from the peak of the latest hiking cycle. 'This, together with continued growth-oriented reforms under the Government of National Unity (GNU), should support growth over the medium term.' ALSO READ: Experts say no way SA can achieve economic growth of 3% this year GDP shows economy grew slower than in the fourth quarter Crystal Huntley, Johannes (Matimba) Khosa and Nicky Weimar, economists at the Nedbank Group Economic Unit, say the 0.1% GDP growth was slightly better than their and the market's forecasts of no growth. 'Compared to the same quarter a year ago, the economy grew by 0.5%, slower than in the fourth quarter of 2024. We did not expect fireworks, but today's numbers are disappointing. Statistics SA also lowered the 2024 estimate slightly. 'Despite the lower base and patchy picture of the first quarter, we still expect the economy to gain some upward traction in the quarters ahead. The boost will continue coming from consumer demand, which should accelerate as inflation remains subdued, and interest rates decline further, bolstering real incomes and lowering borrowing costs.' They say the upside will be capped by slower government spending due to fiscal constraints, patchy fixed investment and a weaker net trade position caused by fading global growth, subdued commodity prices and persistent policy uncertainties. 'We expect GDP to grow by 1% in 2025, only moderately better than 0.5% in 2024, and we forecast GDP growth of around 0.3% for the second quarter.' ALSO READ: Reserve Bank warns global trade tensions can cut GDP by 0.7% Weak economic growth evident before adverse global developments Professor Raymond Parsons, economist at the NWU Business School, said the disappointing GDP growth figure of 0.1% comes as no surprise, as it merely confirms several months of muted high-frequency economic data that pointed to this likely outcome. 'Although adverse global developments earlier this year also played a role, the weaker economic data was already apparent before then. This reality was already recently also presaged by several reduced growth forecasts for 2025, including by the National Treasury (1.9% to 1.4%) and the Sarb (1.7% to 1.2%). 'If present trends persist, the growth outlook for this year now seems likely to be only about 1%, possibly rising to about 1.5% in 2026. It is clear that the incipient economic recovery in South Africa is presently struggling to gain momentum and needs maximum support to strengthen the business cycle upturn.' ALSO READ: This is where we would be if SA sustained an economic growth rate of 4.5% At least GDP managed to avoid contraction Kristof Kruger, senior fixed income trader at Prescient Securities, says the GDP offered a mixed picture of economic performance. 'While the economy showed some resilience in the quarter-on-quarter figures, annual growth continues to slow down, reflecting ongoing structural challenges. 'On a more encouraging note, the GDP growth exceeded the market expectation of -0.1%. While the number is modest, it provides some relief, indicating that the economy managed to avoid contraction during the first quarter.' He says the overall growth trajectory for 2025 remains subdued and that South Africa's economic fundamentals continue to face several headwinds, including: Structural issues like energy shortages and high unemployment Global trade uncertainty and slow growth in key trading partners Domestic policy challenges and a lack of political cohesion within the government. 'The first-quarter GDP data for South Africa offers both hope and caution. The slight surprise in quarter-on-quarter growth shows that there is some resilience, but the continued slowdown in annual growth paints a more challenging economic picture.'
Daily Maverick
19-05-2025
- Business
- Daily Maverick
A R75bn question mark hangs like the sword of Damocles over Godongwana
It's important to note that both the domestic and global macroeconomic outlook have worsened since the withering of Budget 1.0 and Budget 2.0 on the political vines. The bottom line is that South Africa is running out of fiscal room. Over the medium term — meaning the next three years — there is a R75-billion question that Finance Minister Enoch Godongwana will need to answer on Wednesday, 21 May 2025, when he makes an unprecedented third attempt at tabling the Budget. With the proposed VAT hikes now off the table, there is a R75-billion shortfall forecast over the next three years that needs to somehow be plugged, and the fragile South African economy has few faucets that can still be tapped. That leaves just three options — tax hikes, spending cuts or increased borrowing. Among economists, there is consensus that there is virtually no more scope for hikes to income or corporate tax, though the fuel tax levy could be played with to siphon some more liquidity for the Treasury. What this means for you If you are a taxpayer, no relief is in sight but there should be little additional pain — in the short run. In the longer run, a failure to keep the debt-to-GDP ratio from surging above current levels is needed if you want tax relief down the road. Faster levels of economic growth are also critical to reduce your future tax burden and to create jobs. At the end of the day, the Budget is about your hard-earned money and how the government spends it. Beyond that, it comes down to belt tightening or the debt market. 'There will likely be spending cuts and increased borrowing,' Jee-A van der Linde, senior economist at Oxford Economics Africa, told Daily Maverick. Van der Linde pointed out that ratings agencies such as S&P — which last week affirmed South Africa's BB- credit rating with a positive outlook — forecast that the country's gross debt to gross domestic product (GDP) ratio will reach 80% this year. That is in sharp contrast to the Treasury's latest projection of the debt to GDP ratio peaking at 76.2% for 2025/26. 'If you look at what the ratings agencies expect, like S&P, of an 80% debt to GDP ratio and yet they maintain a positive outlook, that tells me that the Treasury may increase borrowing. It's already being priced in by the ratings agencies,' Van der Linde said. Still, South Africa can no longer borrow and spend like a drunken sailor. 'The National Treasury will have a hard time finding sustainable revenue sources in the current economic environment,' Van der Linde said. Spending That brings into sharp focus the need for a blade to cut spending. 'We think that the Minister of Finance could announce a spending review in the October 2025 Medium Term Budget Policy Statement. We have pencilled in a net increase in spending of R30.0-billion compared to R61.6-billion in Budget 2.0 in FY25/26, consisting of a combination of infrastructure and 'other',' Tertia Jacobs, Investec Treasury economist, said in a pre-Budget note. 'In contrast, new spending on the frontline could be tied to a spending review or reprioritisation of existing expenditures.' Jacobs also noted while 'some fiscal slippage is expected… this may not translate into an increase in bond supply due to higher available cash balances'. Jacobs flagged two developments since Budget 2.0 — an opening cash balance that is R20-billion higher, and an R80-billion surge in the value of the Reserve Bank's Gold and Foreign Exchange Contingency Reserve Account because of red-hot gold prices. Last year the Treasury announced it would draw down R150-billion from this source over the next three years, and it could conceivably be tapped again. The R75-billion shortfall has also been questioned by some. 'To preemptively justify expenditure cuts, National Treasury has deliberately exaggerated the revenue implications of removing the originally proposed VAT increase. A reversal of VAT implies a R2.7-billion gap in the current fiscal year and a R60-billion gap over the medium term, instead of the R75-billion widely quoted,' the Institute for Economic Justice (IEJ) said. To avoid an 'austerity budget', the institute suggests removing tax breaks linked to pensions and medical aid contributions for high-income earners, restoring the corporate income tax to 28% from 27%, and dipping back into the Reserve Bank's Gold and Foreign Exchange Contingency Reserve Account. Domestic and global macroeconomic outlooks have worsened It's also important to note that both the domestic and global macroeconomic outlooks have worsened since the withering of Budget 1.0 and Budget 2.0 on the political vines. The Treasury's rose-tinted forecast for economic growth of 1.9% this year is bound to be shaved. The International Monetary Fund (IMF) cut its 2025 forecast for South Africa on this front last month to 1.0% from 1.5%. The IMF also pared down its global growth forecast for this year to 2.8% from 3.% largely because of the chaos and uncertainty triggered by US President Donald Trump's ham-fisted tariffs and trade wars. The bottom line is that South Africa is running out of fiscal room and that R75-billion question is the sword of Damocles hanging over Budget 3.0. DM
