• That means addressing its vulnerabilities by strengthening the structural economy and increasing international trade.
• It also means focusing on areas it can control, including its debt trajectory.
• BLSA is encouraged by the approach taken by government in trying to restore relations with the US as well as its emphasis on the importance of diversifying SA’s trade markets.
• The Middle East is showing strong interest in investing in Africa and SA can position itself to capitalise

The IMF’s Fiscal Monitor paints a grim picture for both global and domestic growth. External headwinds, particularly the trade conflicts sparked by the US but also geopolitical conflicts, are hitting South Africa while it is economically vulnerable. And that is exactly where we need to focus in these difficult times: on fixing our vulnerabilities by strengthening the structural economy and increasing international trade so that we’re better equipped to handle future challenges.

It means redefining our role in the world, recalibrating our trade relations and pushing ahead with the structural reforms we’ve undertaken – and we’re already feeling some benefits from the progress that we have made – as well as ensuring our fiscal path remains on track and does not spiral, as the IMF warns of in its report. It says that unless government tightens fiscal policy, SA’s public debt will rise to 88% of GDP by 2030 – far higher than the 73% level that National Treasury is aiming for in its planned fiscal trajectory. The IMF called for SA to take more measures to bring down the debt level, saying we should target 60% to 70%. It also downgraded its GDP growth forecast for 2025 from 1.5% at the beginning of the year to 1.0% and the World Bank’s forecast is even bleaker, at 0.7%.

That grim picture is exacerbated by a global economy which the IMF now expects will grow just 2.8% this year, sharply down from its January forecast of 3.2%, largely because of the disruptions to international trade.

This situation – with the country’s economic prospects having worsened so sharply since January – demands that we focus on areas that we can control. Those include our debt trajectory, where we simply have to prove the IMF wrong because if debt does rise to 88%, it will be even more difficult to reduce it from that level and then there is a real danger that it spirals out of control, which could force the country to turn to the IMF-bailout route, which would be devastating.

We can also control our reform process and the importance of this is reflected in Kumba’s recent statement that, despite the reforms of our rail systems still being in their very early stages, the improvement in Transnet’s rail performance supported a 6% increase in Kumba’s iron ore sales volumes. This is a small step but it is important: as recently as 2022, the Minerals Council reported that the mining industry lost R50bn because of Transnet’s inability to export their minerals due to the dysfunctional rail system.

The country needs efficient transport and logistics systems and a secure energy supply not only to boost domestic economic activity but also to attract foreign investment and increase trade volumes. While it is important that the country keep working hard to improve relations with the US, it must also try to expand trade with existing and new markets. Being able to boast of significant progress in our reform agenda will facilitate both foreign direct investment and increased trade.

In recent interactions with government, BLSA has been encouraged by the approach taken in trying to restore relations with the US as well as its emphasis on the importance of diversifying our trade markets. This includes the Department of Trade, Industry and Competition which has been on the front foot, though much of the work it is doing to facilitate talks with the US is not in the public eye. BLSA is encouraged by the non-confrontational way it is responding to the US, which includes an assessment of which sectors already operate in the US with a view to expanding their investments there.

The DTIC is also emphasising the importance of presenting a united front, a point which newly appointed special envoy to the US, Jonas Mcebisi, reiterated in his briefing to BLSA members last week, where he repeatedly highlighted the need for collaboration and communication between the relevant government departments and business to ensure SA’s interests are prioritised. The recent telephone call between the two presidents, Cyril Ramaphosa and Donald Trump, and subsequent news that they had agreed to a meeting, hopefully reflects the progress made in restoring relations with the US which remains incredibly important to SA as a trade partner.

Yet the turmoil caused by the Trump administration’s tariff policies emphasises the importance of diversifying and expanding our trade markets – something also emphasised in feedback by BLSA members. And here SA does have much to offer, both in terms of improving trade with other African countries through the African Continental Free Trade Area, a point I emphasised in this newsletter earlier this month, and by capitalising on renewed interest in Africa from global investors, particularly the Middle East.

At a conference last year on global collaboration in Riyadh, attended by 35 trade ministers from Africa, the Gulf Cooperation Council which includes the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain and Oman announced 73 foreign direct investment (FDI) projects in Africa worth more than $53bn.

 

The UAE and Saudi Arabia in particular hold much potential for SA. The UK Guardian newspaper reports that the United Arab Emirates has become the largest backer of new business projects in Africa as it positions itself as a gateway to Africa for Russia and China as well as Western countries. Between 2019 and 2023, UAE companies announced $110bn of projects in Africa, $72bn of them in renewable energy, more than double the value made by companies from China, the UK and France.

SA is already among the UAE’s top trading partners in Africa, holding 8% of the continent’s non-oil trade with the continent, and between 2014 and 2024, companies based in the UAE invested in a total of 28 FDI projects in South Africa which generated capital expenditure estimated at $23.64bn, according to Wesgro, the Western Cape trade, tourism and investment promotion agency. Trade between the two countries is already increasing, with SA’s exports to the UAE in 2024 rising 6% to $2.6bn, though imports fell 25% to $3.98bn.

Saudi Arabia is another Middle Eastern country that offers much potential. BusinessTech.co.za reports that since the 2022 meeting between President Ramaphosa and Saudi Crown Prince Mohammed bin Salman in 2022, about $5bn worth of deals in renewable energy, logistics, fuel stations and real estate are in process, some signed and some still in discussions. This could be expanded further next month at the 10th SA-Saudi Joint Economic Committee in Riyadh.

Other regions also offer improved trade potential, particularly those looking to diversify their trade markets due to the trade turmoil caused by the US, and many are turning their attention to Africa. As the continent’s most industrialised country, we have much to offer and need to think smart in making ourselves an attractive investment destination. That means not only ensuring the reforms continue apace but also removing many of the unnecessary obstacles we have for foreign investment, particularly regarding red tape.

That must be part of our process of recalibrating and redefining our role in the world – making the country more attractive to foreign businesses while using the reforms and our status as a strong economy on the continent as major selling points.

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BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. BLSA is committed to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.