South Africa

A slow and challenging business environment has been affected by recent load shedding implemented by public utility Eskom.

The ban on copper scrap exports remains in place; dealers are still exporting ingots, blocks and billets, although there is the possibility of a duty being imposed. Confirmation is awaited by the end of March on the way forward with the International Trade Administration Commission (ITAC) regarding the current system, and especially with the price preference system. Aluminium scrap can still be exported through ITAC but most dealers are selling domestically, except for one or two grades that are not consumed locally and therefore have to be exported.

Following its recent postponement pending agreement on the increase in VAT, the latest Budget has now been presented. There is public disquiet over the announcement that VAT will increase by 0.5% in May this year and by a further 0.5% in April 2026 to 16%. Meanwhile, allocation of ZAR 1 trillion to infrastructure projects over the next three years should start to offer assistance to the economy.  

There has been no attempt by the government to cut costs, prevent wasteful expenditure, reduce debt, stop corruption and, most importantly, promote economic growth. At the same time, there is concern at the lack of further funding for state-owned enterprises such as railway, ports and pipelines company Transnet.

The Government of National Unity is struggling to work together at present as it has not given its approval to the Budget.

Ongoing talk of the closure of ArcelorMittal South Africa’s long steel operations at Newcastle is another serious concern for the economy. It depends on whether the government will invest ZAR 1 billion in the business, which seems highly unlikely.  

In other developments, the ABSA purchasing managers’ index fell to 45.3 points in January from 46.2 points in December. The prime lending rate, meanwhile, is currently at 11% after having been cut by 0.25 percentage points on January 30, with further reductions anticipated in the next few months. Inflation is at 3% and hopes are for a decline over the coming period.   

At the time of writing, the ZAR is trading at 18.35 to the US dollar.