The South African economy ends 2025 on a much stronger footing than a year ago but more needs to be done to boost investor confidence if the country is to ratchet up its growth rate, says Prof Raymond Parsons of the North-West University Business School. Fixed capital investment needs to be a much higher proportion of GDP. “In the coming year, a sufficient number of firms must feel that the policy environment and growth prospects justify them making fresh plans for expansion.
A litmus test of rising investor confidence in 2026 would be the extent to which companies can access any new investment opportunities and draw down on the over R1.8-trillion in cash deposits currently at their disposal. Companies are not yet mobilising that cash in any significant way,” Parsons said in a statement on Monday. “In 2026 we therefore need an impulse, a jolt, an acceleration in the pace of structural growth-friendly reforms to which the country is already committed.
Implementation should be the watchword — ensuring that growth-oriented reform commitments are irreversible and translated into tangible improvements in confidence, stability, investment, jobs and service delivery. “In 2026 South Africa’s economic steersmanship must therefore continue to keep the economy firmly on track, so that the tailwinds overcome any headwinds.” The “green shoots” of economic recovery that emerged in 2025 have to be nurtured in the year ahead. Major capacity challenges have to be met to support growth, and the country has to shake off its reputation for high crime levels.
Read Full Article on Business Day
[paywall]
Parsons noted that a number of positive developments over the past few months have created what could be a turning point in the business cycle. There is cautious optimism about the prospects for the economy in 2026 based on the latest available data. Recent positive developments include lower inflation and easier interest rates, South Africa’s removal from the greylist of the Financial Action Task Force, a well-received medium-term budget policy statement (MTBPS), the raising of the country’s investment rating by S&P, a record gold price and a stronger rand.
“So far, these factors have helped to strengthen business confidence, build South Africa’s economic resilience, create more fiscal buffers and stabilise public indebtedness amid adverse global headwinds, such as aggressive US tariffs,” Parsons said. “South Africa’s economic fundamentals look firmer, and the groundwork for durable growth is being laid. In the third quarter of 2025, the economy showed its fourth consecutive rise in economic activity, albeit off a low base.
The GDP growth forecast for next year is now about 1.5%; inflation is projected to be close to the 3% inflation target; and interest rates are expected to decline further. Energy and logistical constraints are being gradually eased.” However, Parsons cautioned that while these factors are necessary conditions for much higher economic growth, they are not sufficient. The MTBPS projection of 1.8% average growth over the 2026-28 period is still too low in light of the country’s socioeconomic challenges and too modest compared with other emerging markets. The government of national unity wants to see at least 3.5% GDP growth by 2030, driven by consumer spending and fixed investment.
[/paywall]
