South African firms report increased consumer demand thanks to improved power supplies and lower inflation. Major companies like Discovery and Nedbank show double-digit profit increases. The International Monetary Fund forecasts economic growth of 1.5% for 2023, with improved household expenditure. While external trade tensions present risks, there is cautious optimism for recovery in South Africa’s economy.
In recent earnings reports, South African companies indicated a resurgence in consumer demand, attributed to the alleviation of severe power shortages and a decrease in inflation. Major firms such as Discovery Ltd., Shoprite Holdings Ltd., and Harmony Gold Mining Co. all demonstrated significant profit increases, with Nedbank Group Ltd. exceeding profit expectations. The recovery in demand encompasses diverse sectors, driven by improved electricity availability and consumer access to retirement funds.
The national power supplier, Eskom Holdings SOC Ltd., has successfully addressed operational inefficiencies, which has enhanced electricity supply reliability. This reliability has positively impacted manufacturing sectors, reducing operational costs and increasing productivity. David Shapiro, Chief Global Equity Strategist at Sasfin Securities, noted the improved conditions, remarking on the steadier market environment, albeit starting from a low base.
According to forecasts by the International Monetary Fund, South Africa’s economy is expected to grow by 1.5% this year, compared to less than 1% in the preceding decade. Although economic growth was only 0.6% in 2024—the slowest since the peak of the COVID-19 pandemic—there are signs of recovery, particularly in household consumption expenditure, which rose by 1% in the fourth quarter.
Bloomberg Economics anticipates that South Africa’s economic growth will accelerate in 2025, fueled by increased consumer demand, leading to strengthened investment and industrial activity facilitated by reforms in the energy and rail sectors. However, external factors, such as the ongoing global trade tensions initiated by former U.S. President Donald Trump, may pose challenges to South Africa’s economic landscape.
Despite these uncertainties, South Africa’s benchmark FTSE/JSE Africa All Shares Index has noted a modest increase of 3.3% this year, although it experienced a slight decline of 0.8% on the Johannesburg exchange around mid-afternoon. The overall sentiment surrounding the recovery of demand and economic growth in South Africa showcases a cautious optimism among stakeholders.
In conclusion, South African firms are experiencing a revival in consumer demand, bolstered by an improved power supply and reduced inflation. These developments are reflected in the positive earnings reports from leading companies. Although challenges remain from global economic factors, the outlook for growth is becoming increasingly favorable, with future expansion projected in key sectors.
Original Source: financialpost.com
