Finance

Standard Bank CEO warns about the rand

Standard Bank CEO Sim Tshabalala

Tariffs proposed by US President Donald Trump will likely stoke prices in South Africa should they go ahead, according to the chief executive officers of two of its largest banks.

The newly inaugurated leader’s moves will likely cause the dollar to strengthen, which will also hurt African nations carrying higher debt loads, FirstRand CEO Mary Vilakazi said in a Bloomberg Television interview.

“We worry about the inflationary impact that the tariffs and the other policies that I think are going to be driven by the US,” Vilakazi said on the sidelines of the World Economic Forum in Davos, Switzerland.

“We still have to watch the execution of what Trump says. One has to ensure we don’t completely get ahead of ourselves.”

Trump has repeatedly wielded tariffs as a threat against friends and adversaries, though this week said he’d prefer not to levy duties on goods from the Asian nation. The US is currently South Africa’s largest trading partner after China.

Tariffs would strengthen the dollar in the short term, accelerate price growth and keep interest rates higher for longer, Standard Bank Group CEO Sim Tshabalala told CNBC in Davos.

“It’s going to have a negative impact on African currencies, it’s going to put pressure on Africans, but it’s too early to tell what the exact magnitude of that is going to be,” he said.

South Africa could escape the worst of the fallout thanks to the decisions by a so-called government of national unity — set up after last year’s elections failed to produce an outright winner — to implement structural reforms to lift gross domestic product growth, Vilakazi said.

So far, those changes have stabilised the nation’s electricity supply and are starting to improve the logistics sector, whose collapse saw coal exports plunge to a three-decade low.

“The government of national unity has its own vulnerabilities, but I think beyond what plays out in public, there is a real commitment to make sure things work,” she said. “Business is rallying behind and supporting the government’s agenda.”

FirstRand plans to increase its investments in South Africa to tap into the “significant projects” that are on the way, Vilakazi said.

“The need for lending to help the economy is quite significant,” she said. “If one looked out three to five years’ time, I think the South African economy would have recovered.”

South Africa’s economic growth is set to accelerate in 2025, halting more than a decade of tepid growth. Economists surveyed by Bloomberg expect growth of 1.7% this year, compared with 0.7% estimated for 2024 and less than 1% on average in the prior 10 years.

Standard Bank’s Tshabalala said improvements in output are achievable.

“We are working hammer and tongs in partnership with the government to try and get to GDP growth of above 3% for this year, and we believe it’s doable,” Tshabalala said.

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