South Africa’s economic growth is expected to improve to 1.0% year-on-year from the likely 0.5% year-on-year growth in 2023. 

This is the view of Investec chief economist Annabel Bishop, who said 2024 could see the start of an interest rate-cutting cycle, lower inflation on average, and improvements to infrastructure. 

She said economic growth in 2024 will be lifted by a reduction and the eventual elimination of congestion at the country’s ports.

However, she warned that electricity supply is not expected to fully and consistently meet demand this year, and higher stages of load-shedding are likely.

“But 2025 should see more capacity from private sector generation, with further build-up over subsequent years,” she added.

South Africa’s economy will likely also get a boost from global economic growth.

The OECD highlighted the likelihood of only a mild slowdown in global growth in 2024, to 2.7% year-on-year versus 2.9% in 2023. 

2024 has already started relatively strong for the South African economy.

Financial markets’ appetite for risk-taking increased into the end of 2023, and the rand strengthened to R18.30/USD, with the JSE gaining close to 12% from early November.

However, both have weakened somewhat to market jitters in the first week of the year. 

“Domestically, sentiment concerns also centre around the nature of the coalition government after the national elections, likely in Q2 2024, which is also dulling business confidence, while uncertainties over the global environment persist, adding to volatility,” Bishop said.

However, she said the local economy will likely get a boost from lower interest rates this year.

As expected, the rise in South Africa’s CPI inflation rate later in the year proved temporary, dropping from 5.9% year-on-year in October to 5.5% in November, and will likely fall to near 5.2% in December’s outcome, Bishop said.

Downward pressure from fuel price cuts saw South Africa’s inflation fall slightly towards the end of last year, as did rand strength for other commodities’ prices. 

While January will likely see a slight rise in inflationary pressure, it will not necessitate higher interest rates.

Instead, interest rate cuts are expected this year. However, the Monetary Policy Committee will most likely wait until CPI inflation runs around or below 4.5%, which is only likely in the year’s second half.

Investec expects three 25 basis point cuts in H2 2024, which would bring the repo rate down to 7.5%. 

“However, the SARB may decide to cut interest rates ahead of time if it feels confident that its forecast has a high probability of CPI inflation averaging at, or below, 4.5% year-on-year in H2 2024.”

“It is too early to tell with 100% certainty if this will be the case yet.”