Speaking during an appearance on Bloomberg Live, Mary Vilakazi, CEO of FirstRand, one of Africa's largest banks, offered a stark assessment of the current global and domestic economic landscapes. The discussion, moderated by John, centered on the unprecedented level of worldwide uncertainty, which Vilakazi declared is "probably at its highest," surpassing even the crises of the pandemic era. This turbulence is fueled by policy uncertainty, tariffs, and geopolitical realignments originating largely from the US. These pressures are causing global fracturing and constant supply chain fragmentation, necessitating a major rebalancing in the global order, as the world will not revert to previous operating levels.
Despite the pervasive global macro uncertainty and the fact that South African GDP growth is less than 2%, FirstRand recently posted solid earnings growth north of 13%. Vilakazi attributed this resilience to significant economic reforms currently underway in South Africa that are addressing long-standing structural impediments. Crucially, the stabilization of energy reliability through Eskom’s efforts to reduce load shedding is a positive sign. Furthermore, momentum is building in transport and logistics, evidenced by the awarding of contracts to 11 private sector companies to operate on transmission lines—a shift Vilakazi acknowledged is perhaps two decades overdue.
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However, the external headwinds remain severe, particularly concerning trade with the world's largest economy. Vilakazi noted that South Africa has been a specific target of former President Trump. Ongoing trade discussions are now taking place between South African representatives and the US to address tariffs. Currently, South Africa is paying about 30% on exports to the US but has not retaliated. The US relationship is complex, rooted in deep historical and cultural ties, with approximately 600 US-based companies operating in South Africa. Vilakazi expressed the wish for the relationship to "make less headlines for the reasons that they have".
The recent expiration of the African Growth and Opportunity Act (AGOA)—the trade accord allowing tariff-free African exports into the US—poses a serious threat. The expiry is expected to have a significant impact on jobs and the ability of small businesses, such as wine exporters who rely on the US market, to grow. While African nations are making "tentative plans" rather than betting on AGOA’s renewal, Vilakazi warned that political tension cannot be discounted, noting that neighboring countries like Botswana and Lesotho face lower tariffs than South Africa.
Despite the structural issues and the global anxiety, capital markets are signaling unexpected confidence: the South African Rand is at its strongest level in 12 months, and the Johannesburg Stock Exchange (JSE) has hit record highs, achieving a 20% return in dollar terms since July. Vilakazi explained that this market strength is driven by South Africa benefiting from high commodity prices (gold and platinum group metals), the easing of monetary policy, and the subsidence of political risk following the formation of the Government of National Unity. Crucially, investors are now believing that structural economic reforms are genuinely taking place, marking a shift from previous narratives.
Vilakazi, who co-chairs the Trade and Investment Task Force for the B20, confirmed the private sector's continued advocacy for lower global trade barriers and strong support for organizations like the World Trade Organization (WTO), essential for smaller African economies. In light of the uncertainty stemming from US policy, African nations have already begun diversifying their trading partners, though the US remains vital for foreign direct investment (FDI) and cultural exchange. The ultimate goal for the South African Reserve Bank (SARB) is to lower its inflation target to the bottom end of the range, potentially reaching 3% in the long run, which would provide significant relief for poor households and aid in government debt management.
