Renowned economist Dawie Roodt shared his economic outlook for 2025 – including interest rate cuts, inflation, the NHI and where investors should be putting their money. 

Daily Investor asked Roodt to share his thoughts on how South Africa’s economy will fare in the coming year.

Where economic growth is concerned, Roodt explained that he expects 2024’s GDP growth to sit at around 0.7% to 0.8%.

This means that economic growth in the region of 1.5%, or even 1.6%, is possible for 2025, as many experts predict.

However, while this is better than the previous year, it is “really weak”, Roodt said.  

“We need economic growth much, much faster, and unfortunately, we’re not going to see that.”

Roodt also commented on the upcoming February budget, saying that he doesn’t foresee many major changes since there is not a lot of space for movement for Finance Minister Enoch Godongwana. 

However, there are some important announcements that could be made during the speech.

One is the possibility of an announcement on a reduction in inflation targeting, which would be positive.

There could also be an announcement that more money is being allocated to the NHI, although this increase would only be marginal.

“The NHI is not going to become a reality. We just do not have money,” Roodt said.  

Finally, there could also be an announcement made on basic income grants, which are likely to replace the Covid grants.

“Those are the most important things. I think the Minister of Finance will try to keep a tight grip on expenditure because we are in very, very deep trouble when it comes to the fiscal accounts.” 

Where interest rates are concerned, Roodt said that the Reserve Bank will likely keep cutting rates. 

In particular, he said to expect three rate cuts of 25 basis points. 

“It really depends on what the Federal Reserve in the US is going to do, but at the moment, expect a 0.75% reduction in interest rates over the next year,” he said. 

Roodt added that he is also “quite bullish on inflation”, explaining that it is likely to average around 4%, below the Reserve Bank’s 4.5% midpoint target.

In 2024, the formation of the Government of National Unity (GNU) after the May elections greatly boosted consumer, business, and investor confidence in South Africa.

Roodt explained that he expects this GNU optimism to continue into 2025, but he also pointed out that keeping it together will be one of South Africa’s biggest domestic challenges this year. 

“There are many dangers here. I hope it’s going to survive,” he said.

The GNU’s fate will ultimately depend on what will happen to President Cyril Rampaphosa since he is the “lynchpin” in the operation. 

If Ramaphosa is removed or recalled, the GNU will likely end as well, he said. In the meantime, though, Roodt remains optimistic about the GNU. 

An important point related to the GNU, Roodt added, is the G20 Summit coming to South Africa since the government will try its best to ensure that its international relations with all attendees are as good as possible. 

On the other hand, South Africa will also face international obstacles in 2025, Roodt said.

In this regard, US President-elect Donald Trump poses a big potential challenge for the country.

“That is the single biggest international challenge that I see at the moment,” Roodt said. 

This is largely due to Trump’s protectionist policies and possible sanctions, which could cause headwinds for South Africa this year. 

Finally, Roodt explained which industries investors should be looking at in 2025.

Broadly speaking, he said that he likes the tertiary industry, which includes the financial and service sectors.

“I’m not very keen on the primary and secondary industry. But the tertiary industries is where I would like to put more money,” Roodt explained.