Transitioning to robust growth, or stuck in second gear? (when it hasn't been your day, your week, your month, or even your year)

South Africa’s economy in 2026 is likely characterised by a slow transition from a base of being stuck around 1% real GDP growth toward a more robust 1.5% to 2% range, driven by the cumulative impact of structural reforms and current cyclical tailwinds.

For many years, as South Africans, we grew accustomed to the rhythmic – but annoying – hum of generators. And so, as we reflect on 2025 and all that it gave us, a peculiar question pops into my head that I do not have the answer for: when was the last time we experienced load shedding? 

For myself and I would assume many others, the answer eludes us, buried under layers of distant bad memories and immense relief. Looking at the data, Eskom last implemented loadshedding nationally on 15 May 2025, whereas in Cape Town loadshedding was last recorded on 25 April 2025. As at the time of writing this article, that is over 250 days ago… yay!

This wonderful outcome largely reflects South Africa’s improved energy stability, as sustained enhancements in Eskom’s generation performance and planned maintenance has started to gain some traction, and the surge in private generation has reduced demand on Eskom. Interestingly, the energy availability factor has increased from a low of 56.5% in January 2025 to a high of 73.2% in January 2026, driven primarily by the reduction in unplanned outages from 28.8GW 12 months ago to 15.8GW currently. Quite a remarkable turnaround, to say the least, and while we are not completely out of the woods, we can safely say that 2025 was impressive year of almost zero loadshedding.

But what else went well in 2025 in South Africa? In summary, lots. 

For one, our economy experienced strong cyclical tailwinds; multiple economic drivers were in our favour that, in theory, should accelerate growth over the short-term. For example, South Africa’s terms of trade were boosted by record-high precious metals prices, which in turn provided a significant benefit for the fiscus and the rand. Then there were the SARB and National Treasury that adopted a lower inflation target, paving the way for a lower long-term policy rate, and ultimately a host of other benefits, including lower debt costs and higher competitiveness. And finally, the GNU remained intact despite a few disagreements around the budget and other policy issues, such as South Africa’s sovereign credit rating was upgraded by S&P to ‘BB’ (first upgrade in 20 years!), and successfully removed from the Financial Action Task Force grey list. Certainly, these drivers firing together suggests that South Africa is better positioned to weather global crosscurrents than we have been in the recent past.

All in all, an alignment of (economic) stars, of sorts.

But what does the stars foretell for 2026? And will these strong cyclical tailwinds be strong enough to lift growth over the medium-term? Looking at the data again, we see South Africa’s real GDP growth rate for 2025 to likely just pip over 1%, and the average consensus estimate that growth in 2026 will be in the region of 1.4%. Estimates further out are not much higher. And so, it appears odd that given the broad range of positive economic drivers we experienced in 2025, that the real GDP growth outlook for 2026 and beyond is not higher. Perhaps closer to the 2% or even 2.5%.

The sobering reality is that structural challenges persist in South Africa, largely in the form of supply side bottlenecks. These constraints have kept a lid on our potential growth for years, and in so doing, crippling essential infrastructure for years to come, effectively immobilising South Africa’s growth engine. A massive task, the mandate of Operation Vulindlela is to undo this damage and implement structural reforms. Understandably, it will take time.

While energy bottlenecks are clearing, improvements in the logistics sector are happening, albeit slowly. Rail and port volumes remain significantly below levels seen five years ago, and therefore, reform in the logistics sector focusses on restructuring Transnet, establishing an independent Transport Economic Regulator, and increasing private sector participation in rail and port networks. These interventions are expected to meaningfully lift the ‘speed limit’ previously imposed on the economy by infrastructure bottlenecks. Natural spillover effects include, improved business sentiment and subsequently higher capex and investment, which in turn further solidifies growth momentum.

While we believe the risk skew for South Africa’s growth trajectory is firmly to the upside, there are a few downside risks we are watching carefully. The 2026 local government elections (expected between November 2026 and January 2027) certainly presents a source of political noise. Contestation between key GNU partners, particularly the ANC and DA in metro battlegrounds like, Johannesburg and Tshwane, could test the stability of the national coalition. Furthermore, long-term investors are already considering the 2027 ANC elective conference, which introduces uncertainty regarding policy continuity and the future of the reform agenda. 

Another risk in our view is renewed geopolitical risk and trade tensions. South Africa remains a soft target for the US administration’s trade policies. While the direct growth impact of 2025's tariff hikes were modest, omnipresent US policy uncertainty contributes to currency volatility and impaired global sentiment. The potential loss of African Growth Opportunity Act benefits or additional sanctions related to South Africa’s geopolitical stances remain tail risks. 

Lastly, a downside commodity price shock would be another key risk to growth. South Africa’s economic prospects have always been strongly linked to a potential windfall from higher commodity prices, creating a virtuous positive revenue shock. While not our base case view, this scenario, particularly if severe, would jeopardise the economic buffers created in 2025. Beneficiaries of the higher commodity prices – e.g. bond yields, the rand and fiscal performance – will likely be challenged. In our view, the overriding macroeconomic theme for South Africa in 2026 is one of watchful optimism. The economy is poised to deliver its best growth momentum in over a decade as structural constraints slowly ease, and supported by cyclically high commodity prices, energy stability and GNU continuity. However, the path is not without obstacles. Investors should prioritise underappreciated quality stocks with resilient earnings and proven track records, while closely monitoring the political heat generated by the upcoming municipal elections.