South Africa opens 2026 with a spotlight on the manufacturing sector, as the rest of the week brings November manufacturing production figures.
Stats SA data offered a mild upside surprise in October: manufacturing production rose 0.2% year-on-year, defying expectations of a contraction.
Growth was recorded in eight of 10 divisions, with food and beverages and electrical machinery providing the biggest lift.
Looking ahead, economists enter 2026 with cautious optimism. Improved fiscal indicators, easing structural constraints and better-than-expected performance in 2025 have raised hopes that the country may be on the cusp of stronger growth — provided reform momentum holds.
Prof Raymond Parsons of the NWU Business School noted: “The South African economy ended 2025 in a stronger and better position than it was a year ago. In the past few months, a number of positive developments have created what could be a turning point in the business cycle.”
He sees real GDP growth reaching about 1.5% in 2026, with inflation near the 3% target and interest rates expected to decline further.
PSG Financial Services chief economist Johann Els expects GDP growth to rise from 1.4% in 2025 to 1.7% in 2026, driven largely by resilient consumer spending and a gradual recovery in fixed investment.
Inflation is forecast to tick up to 3.7% in 2026 before drifting lower again, while two interest rate cuts are expected in the first half of the year.
But economists agree that stronger growth will depend on more investment.
“Fixed capital investment as a growth driver in particular needs to be a much higher proportion of GDP,” Parsons said.
“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.”
With more than R1.8-trillion in corporate cash still sitting idle, the test in 2026 may be whether enough firms see reason to invest.
“Implementation should be the watchword — ensuring that growth-orientated reform commitments are irreversible and translated into tangible improvements in confidence, stability, investment, jobs and service delivery,” Parsons said.
Oxford Economics senior economist Jee-A van der Linde flagged political dynamics as a key risk to watch this year, noting 2026 will present unique challenges, as the government of national unity (GNU) faces local government elections in late 2026, probably in November.
“The 2026 budget, scheduled for February, could set the tone for the remainder of the year. The first hurdle will be the budget itself, with political parties probably seeking to avoid a repeat of the 2025 budget debacle,” he said.
The 2025 national budget was postponed twice before it was tabled in May last year, an unprecedented development in the democratic era.
The budget was initially scheduled for February but was postponed amid political deadlock in the GNU, primarily over proposed tax measures, including a possible VAT increase.
A revised tabling date in March was also abandoned as coalition partners failed to reach an agreement, forcing a second delay.
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