If US President Donald Trump's proposed tariffs go through, they are expected to drive up prices in South Africa, according to the CEOs of two major South African banks. FirstRand CEO Mary Vilakazi, speaking in an interview at the World Economic Forum in Davos, Switzerland, warned that the tariffs could strengthen the dollar, which would hurt African nations with high debt levels. "We are concerned about the inflationary effects of these tariffs and other policies that Trump may push forward," Vilakazi said. "We still need to closely monitor how Trump's plans unfold, but we must be cautious not to jump to conclusions."
Trump has often used tariffs as leverage against both allies and adversaries, though this week he indicated a preference not to impose duties on goods from China. Currently, the US is South Africa’s largest trading partner after China.
Standard Bank Group CEO Sim Tshabalala told CNBC at the World Economic Forum in Davos that tariffs could strengthen the dollar in the short term, driving up prices and keeping interest rates elevated for longer. He cautioned that while the full impact on African currencies remains uncertain, the effects would likely put pressure on African nations.
However, South Africa might avoid the worst outcomes, thanks to the government's recent structural reforms aimed at boosting economic growth, according to FirstRand CEO Mary Vilakazi. These reforms, implemented by the "government of national unity" formed after last year’s inconclusive elections, have already helped stabilize the country's electricity supply and improve its logistics sector, which had suffered a collapse that led to a sharp decline in coal exports.
Vilakazi acknowledged that while the unity government faces challenges, it remains committed to making progress. "Business is rallying behind and supporting the government's agenda," she said. FirstRand plans to boost its investments in South Africa, eyeing "significant projects" in the pipeline. "The demand for lending to support the economy is substantial," she added, forecasting that the South African economy would be on a path to recovery in three to five years.
Economists surveyed by Bloomberg predict that South Africa's growth will pick up in 2025, ending a decade of sluggish expansion. Growth is expected to reach 1.7% this year, compared to a 0.7% estimate for 2024 and an average of less than 1% annually over the past 10 years. Tshabalala believes growth could exceed expectations: "We are working intensively with the government to achieve GDP growth above 3% this year, and we believe it’s achievable."