The IMF’s latest upward revision of South Africa’s growth outlook to around 1.4%-1.5% appears optimistic given both domestic structural constraints and a rapidly deteriorating external geopolitical and trade environment.
In particular, three interrelated external risks are being materially underpriced:
- Renewed US protectionism under the Trump administration;
- Escalating tariff and trade-war risks;
- Growing US hostility towards Brics countries, including South Africa.
These factors significantly weaken South Africa’s growth outlook and increase the probability of negative external shocks. Based on the balance of risks, I believe a more realistic central forecast for South Africa’s real GDP growth over the next 12–24 months lies closer to 0.5%–1%.
The IMF’s World Economic Outlook projections are built on a global baseline that implicitly assumes broadly stable global trade relations, no major escalation in tariffs or trade wars, benign global financial conditions, continued moderate
capital inflows into emerging markets, and gradual improvement in domestic supply constraints. These assumptions are now under severe strain.
External trade risk is being underpriced
South Africa is unusually exposed to global trade policy shifts through preferential access regimes such as the Africa Growth and Opportunity Act (Agoa), and heavy reliance on exports of vehicles, auto components, steel, aluminium and agriculture.
Renewed US protectionism materially raises the probability of tariffs or quotas on South African exports. Loss or dilution of Agoa benefits, weaker global trade volumes, and even a moderate tariff shock could shave 0.30 percentage points off GDP growth.
The IMF forecast does not meaningfully incorporate this risk.
Growing US hostility towards Brics
South Africa’s formal alignment with the Brics group now carries increasing economic risk.
The current US political environment is becoming overtly hostile towards Brics expansion, and the de-dollarisation rhetoric.
Non-aligned or anti-Western geopolitical postures for South Africa raise the probability of targeted trade pressure or punitive tariffs, reduced preferential trade treatment, greater scrutiny of capital flows and investment approvals, and informal diplomatic and financial sanctions. While not yet codified into formal policy, this geopolitical shift meaningfully increases South Africa’s external risk premium.
IMF models underestimate geopolitical shocks
IMF forecasting frameworks are strong at trend extrapolation but weak at discontinuities such as trade wars, sanctions, sudden tariff regimes and geopolitical realignments.
Historically, the IMF underestimated the growth damage from Trump’s first trade war, Brexit, Covid supply-chain disruptions, and the Ukraine war.
This creates a systematic optimism bias in periods of rising geopolitical risk.
South Africa’s internal growth ceiling remains low
Even without external shocks, domestic constraints already cap growth near 1.5%-2%.
Electricity supply remains fragile, ports and logistics are dysfunctional, private fixed investment is weak, real interest rates remain high, policy uncertainty and low confidence persist. These constraints limit upside potential and amplify downside shocks.
Trump-style policy regimes typically generate a stronger US dollar, capital outflows from emerging markets, and higher global bond yields.
For South Africa, this implies a weaker rand, higher imported inflation, less scope for Sarb rate cuts, higher debt-service costs, and lower investment. All of these are growth-negative.
Why the balance of risks is now to the downside
Layering geopolitical risk, Brics-related political risk and trade shocks onto an already weak domestic growth base shifts the entire forecast distribution downwards.
Key downside risks now include the escalation of US tariffs and trade restrictions, Agoa uncertainty or withdrawal, targeted economic pressure on Brics-aligned countries, and a stronger dollar and emerging markets risk-off flows, higher inflation and tighter domestic monetary policy.
Under this risk configuration, the IMF’s 1.4% to 1.5% growth forecast is best interpreted as a best-case scenario, not a central one.
My alternative growth forecasts
Taking into account these structural domestic constraints, trade and tariff risks, Brics-related geopolitical risk and South Africa’s vulnerability to external shock, I place the country’s realistic growth range at between 0.5% and 1% for the next 12–24 months.
This implies continued stagnation in per capita incomes, no meaningful reduction in unemployment and ongoing fiscal strain.
To illustrate how sensitive South Africa’s growth outlook is due to external shocks, consider a moderate adverse-trade scenario: A 10% to 15% effective tariff or quota shock on key exports (autos, metals, agriculture), partial or full suspension of Agoa preferences, a stronger US dollar and emerging markets risk-off capital flows.
The estimated macro impact would be a direct export volumes decline of -5% to −10%, a Rand depreciation of 8% to 15%, imported inflation around +1–2 percentage points and higher domestic interest rates or delayed Sarb easing.
Policy implications for South Africa
The country should build fiscal buffers rather than assume a cyclical recovery; and avoid pro-cyclical spending increases based on optimistic growth forecasts.
Furthermore, there must be an acceleration of expenditure reprioritisation towards logistics, energy and export competitiveness.
In relation to monetary policy, there needs to be a recognition that external shocks may limit the scope for Sarb rate cuts. Hence, policymakers must maintain credibility on inflation targeting to protect the rand and prepare contingency liquidity facilities for emerging markets risk-off episodes.
A trade and diplomatic strategy that urgently de-risks Agoa exposure through alternative export markets must be prioritised. Recalibrate Brics rhetoric towards economic pragmatism rather than symbolism. Actively signal geopolitical non-alignment and trade openness, and pursue bilateral trade deals with EU, UK and Asian partners.
On the domestic side, structural reforms should take the shape of fast-tracking energy market reform, liberalising port and rail operations, and reducing regulatory barriers to private fixed investment.
