Analysts from Moody’s Investors Services are expecting stability for the country’s budget retailers. File photo
With South Africa’s operating environment projected to improve, analysts from Moody’s Investors Services are expecting stability for the country’s budget retailers.
Moody’s yesterday also said gold miners such as Pan African Resources, Harmony Gold, and others would continue benefiting from elevated bullion prices next year.
Lowering interest rates, receding inflationary pressures, reduced electricity load shedding and movements to fix the logistics sector, including ports and rail, have all provided a strong bedrock for firmer business confidence in South Africa.
Moody’s analysts, however, said they believed that despite the improved electricity supply situation under Eskom in the past few months, energy availability remained a constraint for South African companies. The Minerals Council and other business groupings have recently voiced out against the high costs of electricity.
“Energy availability, while improving, remains a constraint,” said Moody’s.
Nonetheless, the ratings agency sees South Africa’s economy rebounding by 1.7% for 2025.
Budget retailers such as Boxer, which recently completed a separate listing on the JSE, are expected to be stable in the coming year as consumers seek value propositions.
“In South Africa, the operating environment is set to improve; we expect retailers focused on budget-conscious consumers to stabilise and grow above the inflation rate,” said Moody’s analysts.
The analysts are also expecting South African gold miners to continue benefiting from higher gold prices. Sibanye-Stillwater and DRDGold are among the other South African gold miners.
South African platinum group metals, despite battling prolonged low prices of the commodity, could also start to see the benefits of cost restructuring in 2025.
“Gold miners will benefit from high gold prices, and the platinum group metals segment may see a gradual improvement in pricing as miners close unprofitable operations and postpone investments, and metal stocks deplete.”
However, Nedgroup Investments reckons that with US President-elect Donald Trump threatening to implement punitive import tariffs on Chinese goods, there were downsides for South Africa’s commodity and currency sector.
“China is a major importer of South Africa’s commodities, and a weaker Chinese economy would hurt the local currency,” said the asset management and advisory company.
Despite this, South Africa’s commercial real estate sector is expected to “remain under pressure because of excess supply” although local Real Estate Investment Trusts have been restrategising their portfolios to better fit the current operating environment.
Looking at the rest of sub-Saharan Africa, Moody’s analysts said the region’s prospects were better for 2025 after a difficult 2022-2024, driven by expectations of slower depreciation of local currencies and anticipated expected rate cuts.
“This supports the operating environment for telecommunications as well as real estate and construction-related industries,” said Moody’s.
In Nigeria, for example, the naira currency’s “depreciation is likely to slow, although high inflation will curtail domestic demand” as consumers' purchasing power reduces.
BUSINESS REPORT