South Africa's economic outlook has taken a significant hit as both Moody's and the Bureau for Economic Research (BER) have slashed their growth forecasts for the country in 2025. The revised predictions come amid a backdrop of ongoing political instability and global economic challenges, particularly the impact of U.S. tariff policies.
Moody's has downgraded its growth forecast for South Africa from 1.7% to 1.5%, citing a global slowdown that is affecting multiple nations and increasing policy uncertainty. Similarly, the BER has made a more drastic cut, reducing its estimate from 2.0% to 1.5%. This reduction aligns with the median expectations of 27 economists surveyed by Bloomberg, reflecting a broader pessimism regarding South Africa's economic prospects.
According to BER Chief Economist Lisette IJssel de Schepper, the country's economic growth is now expected to lag significantly behind the ambitious 3% target set by President Cyril Ramaphosa since the establishment of the government of national unity (GNU). "In the second half of last year, we were getting a bit more excited. We saw some progress on the reform front, and government was starting to add positively to growth momentum," said De Schepper. "That assumption has now shifted."
The economic forecast has been further complicated by U.S. President Donald Trump’s tariff war, which has disrupted global trade dynamics. The BER noted that South Africa's economy would have performed better if not for the 10% universal tariff imposed by the U.S., which has sent shockwaves through international markets. "Some of the puzzles of growth we’re moving into place, but Trump has obviously swooped some of the puzzle pieces straight off the table," De Schepper added.
In a related development, the International Monetary Fund (IMF) has also revised its forecast for South Africa, projecting a mere 1.0% growth, down from an earlier estimate of 1.5%. This downgrade reflects a more cautious stance on the country's economic recovery amidst a global slowdown. Other financial institutions like Investec and Nedbank have similarly lowered their projections, with Investec now anticipating a 1.3% growth and Nedbank reducing its forecast to 1.1%.
In stark contrast, the National Treasury had maintained a more optimistic outlook during the last budget presentation in March, predicting a growth rate of 1.9%. The South African Reserve Bank (SARB) was also slow to adjust its expectations, forecasting a growth of 1.7% just before the U.S. tariffs were enacted. Both the National Treasury and SARB are expected to provide updated forecasts when the third iteration of the budget is presented on May 21, 2025, and when the SARB’s Monetary Policy Committee meets on May 29.
As South Africa grapples with these economic challenges, industry leaders are calling for urgent measures to combat illicit trade, which they argue is further straining the economy. A recent report from the Transnational Alliance to Combat Illicit Trade (TRACIT), released in collaboration with Business Unity South Africa (Busa), highlights the significant economic losses attributed to illegal trade practices.
The TRACIT report reveals that illicit trade in sectors such as alcohol, tobacco, food items, pharmaceuticals, and wildlife trafficking is costing South Africa an estimated R30 billion annually in lost revenue. Philippe Van Gils, director of illicit trade prevention at Philip Morris International, emphasized the need for a national anti-illicit trade strategy to safeguard legitimate businesses and government revenues. "Illicit trade deprives the government of critical revenue, fuels organized crime, and puts legitimate businesses at a disadvantage," he said.
South Africa currently ranks 60th out of 158 countries in terms of its resistance to illicit trade, indicating moderate resilience but also notable vulnerabilities, particularly in supply chain control and enforcement capacity. The report underscores the importance of strengthening border controls, enhancing regulatory enforcement, and utilizing technology to secure supply chains.
Van Gils urged the government to integrate smart tax policies and robust regulatory frameworks to effectively combat illicit trade. He noted that, while South Africa has made progress in customs modernization and cross-border enforcement, weaknesses remain in oversight and inter-agency coordination.
TRACIT director general Jeffrey Hardy stressed the urgency of implementing strong enforcement measures to dismantle illicit networks. "South Africa stands at a crossroads," he said, highlighting the ongoing threat that illicit trade poses to the country’s economic recovery and public safety. "If left unchecked, it will continue to rob the government of vital revenues, distort legal markets, and deter both domestic and foreign investment," Hardy warned.
In light of these challenges, industry players, including Philip Morris South Africa, have committed to collaborating with law enforcement and customs agencies to combat illicit trade. This includes investing in digital authentication and track-and-trace technologies, running consumer awareness campaigns, and supporting regional cooperation efforts.
The TRACIT Index serves as a vital resource for South Africa and other nations, offering a playbook for action against illicit trade and corruption. Van Gils concluded by urging all stakeholders to align their efforts to protect economies from the corrosive effects of illicit trade.
As South Africa navigates a tumultuous economic landscape, the interplay between legitimate business practices and the challenges posed by illicit trade will be crucial in determining the nation’s path forward.