🇿🇦 South Africa's Economic Pulse: Week of 21-25 April 2025

By Loy de Jager | Principal, Upside Properties

A week of political reversals, global trade uncertainty, and cautious optimism in the local economy - all with direct implications for South Africa's property sector.

📊 Domestic Highlights

VAT Increase Scrapped Amid Coalition Tensions
On April 24, Finance Minister Enoch Godongwana announced the withdrawal of a planned 0.5% VAT increase that was set to take effect on May 1.
The decision followed intense political pushback from coalition partner the Democratic Alliance (DA), legal challenges, and public opposition.
The reversal leaves a R75 billion hole in the budget, prompting the Treasury to prepare revised expenditure plans to maintain fiscal stability.

Rand Strengthens Slightly After VAT Reversal
The South African rand appreciated marginally to 18.66 against the U.S. dollar following the VAT decision, reflecting short-term investor relief.
However, broader concerns about fiscal discipline and coalition stability continue to weigh on market sentiment.

Inflation Eases, but Food Prices Remain Elevated
March inflation data showed a decline to 5.3%, the lowest since June 2020, aided by lower fuel costs and moderated tuition hikes.
However, food inflation remains high, keeping pressure on consumers.
Economists anticipate that the South African Reserve Bank will hold the repo rate at 7.5% in May, with potential rate cuts later in the year.

🌍 Global Factors

U.S. Tariff Pause Offers Temporary Relief
The United States announced a 90-day pause on a proposed 31% tariff on South African imports, providing temporary relief to exporters.
However, the potential non-renewal of the African Growth and Opportunity Act (AGOA) adds uncertainty to long-term trade relations.

Gold Prices Reach Record Highs
Gold prices surged to an all-time high of $3,375 per ounce, driven by global economic uncertainties.
As one of the world's largest gold producers, South Africa stands to benefit from increased mining revenues, positively impacting regional economies.

🏠 Property Market Implications

The cancellation of the VAT increase alleviates immediate cost pressures on consumers, potentially supporting retail and residential property sectors.
However, the resulting budget shortfall may lead to reduced government spending on infrastructure, affecting the commercial and industrial property markets.

The pause in U.S. tariffs provides short-term stability for exporters, which could positively influence industrial property demand.
Nevertheless, ongoing trade uncertainties necessitate cautious investment strategies.

🌟 The Upside of the Week

South Africa's Young Innovators Shine at International Science Fair
A team of South African high school students won top honors at the International Science and Engineering Fair in the United States for their groundbreaking work on sustainable water purification methods.
Their innovation not only showcases the country's budding scientific talent but also offers hope for addressing water scarcity issues in rural communities.