South Africa could kiss R14 billion goodbye this year

The implementation of 30% tariffs on South African goods exported to the United States can shave R14 billion off the local economy. 

These tariffs, imposed on all South African exports, will substantially impact the country’s economic growth if lower duties cannot be negotiated quickly. 

In particular, South Africa’s automotive industry and agricultural sector will be significantly impacted by the tariffs, as they are the most exposed to the United States market. 

This is feedback from Efficient Group Chief Economist Dawie Roodt, who outlined to Daily Investor the potential impact of US President Trump’s new tariffs on the South African economy.

Roodt explained that it would be very difficult to calculate the precise impact of tariffs on the South African economy, as it is unclear whether certain exports will be exempted or hit with a double blow.

For example, it is unclear whether South Africa’s automotive industry will be hit with 30% tariffs or remain under the already-implemented 25% tariff on all automotive imports into the United States. 

It is also unclear whether certain minerals exported from South Africa, such as platinum, will remain untouched as they are considered critical imports. 

Roodt also said that a lot can change before the final tariffs are implemented on 1 August 2025, with very little certainty about whether they will be settled. 

Adding to the uncertainty is Trump’s warning that countries aligned with BRICS’ anti-American policies will face an additional 10% tariff. 

However, Roodt estimated that tariffs of between 30% and 40% may result in South Africa’s economic growth being reduced by 0.2 percentage points to 0.3 percentage points. 

In absolute terms, this means the country could lose out on the economic output of between R9.3 billion and R14 billion. 

While this may seem small, Roodt noted that the impact is exacerbated by South Africa’s poor economic growth and existing headwinds. 

“The impact will not be that great. That is the short answer, but there is a lot more to it because the South African economy is hardly growing,” Roodt said. 

“Even a small headwind like this will add to the many problems the country already faces. This is just another nail in the coffin of the South African economy.”

South Africa’s confidence crisis

Perhaps the biggest impact of tariffs on the South African economy will be the knock it has on investor and business confidence in the country.

Roodt explained that tariffs can impact the South African economy through many avenues, including a weaker rand and elevated inflation. 

A particular concern is whether a trade war will erupt between the United States and China, or if the European Union will be subjected to significant tariffs. 

Any slowdown in these economies will substantially decrease demand for South African exports and impact local economic activity. 

“Another way it could impact the South African economy is by disrupting global trade more generally, leading to increased inflation and a weaker currency. This may result in higher interest rates,” Roodt said. 

“However, I think confidence is the single biggest issue and is something that South Africa has been struggling with for years.” 

This confidence crisis has largely been created by the poor economic outcomes of the past decade, alongside widespread corruption and policy uncertainty. 

Investec investment strategist Osagyefo Mazwai conducted an analysis of South Africa’s poor economic growth over the past decade and identified a lack of confidence as a key reason behind its stagnant output. 

“Our fundamental proposition is that South Africa needs to get back to business, and by that, we mean get back to the basics of business confidence,” Mazwai said. 

He explained that the cheapest form of economic stimulus is the restoration of confidence, as that directly translates into increased investment and job creation. 

This has been the case in South Africa’s past, with a high correlation between business confidence and economic growth since 1994.

For instance, President Thabo Mbeki’s second term saw average GDP growth above 4%, which coincided with record levels of business confidence. 

This also translated into improved employment outcomes, with the unemployment rate falling from 28% in 2004 to 21% in 2008. 

This is not a one-way street, as Mazwai explained that business confidence is both a driver and a result of GDP growth. Improved confidence can create a powerful feedback loop.  

“The key is that business confidence should be the main focus of the current government when solving for economic and employment growth, in turn solving for the poverty, unemployment and inequality problem in South Africa,” Mazwai said.