CHRIS HATTINGH | Growth outlook darkens for 2026

Growth-wise South Africa faces a tough 2026. While the 2025 GDP growth rate of 1.1% was an improvement on the 0.5% in 2024, it was largely driven by household final consumption expenditure, which grew 3.6% year on year, contributing 2.4 percentage points to growth.

Worryingly, gross fixed capital formation ― the measure of investment in fixed assets such as infrastructure, heavy plant equipment and machinery ― declined by 2.2% year on year, contributing minus 0.3 of a point.

Since 2024, backed by lower fuel prices, interest rate cuts and relative national government stability, South African households have been the main driver behind the country’s relatively improved economic growth performance. But this growth has not been driven by production and investment. Absent a corresponding rise in productive capacity, consumption-led recovery is inherently fragile; it can be unwound quickly when the conditions that sustained it shift.

Household consumption is especially sensitive to external variables such as fuel and electricity prices, transport costs and municipal rates. With external pressures increasing and likely depressing spending, South Africa is at substantial risk of returning to below 1% growth ― especially because fixed investment has not broken out of the 13%-15% range and into the 25%-30% territory that is needed to generate faster economic growth.

Despite repeated calls for greater partnership with the government, the private sector has remained cautious. Regulatory uncertainty, infrastructure backlogs and an unreliable energy supply continue to suppress the animal spirits needed to shift investment meaningfully higher.

Elevated international oil prices since end-February, with increased South African domestic fuel levies, will bite sensitive households and consumers, depressing disposable income spending decisions. Even with the temporary R3/l general fuel levy cut effective April 1, the price of all grades of fuel increased by R3.06/l and the diesel price rose R7.51/l.

The April 1 increases are expected to add two to four percentage points to headline consumer price inflation in April before any indirect effects are incorporated and impacts calculated.

Elevated international oil prices since end-February, with increased South African domestic fuel levies, will bite sensitive households and consumers, depressing disposable income spending decisions.

The price of electricity also increased from April 1. The National Energy Regulator of South Africa approved an 8.76% average electricity tariff increase for direct Eskom customers. From July 1 the tariff for municipal bulk purchasers will increase 9.01%.

These fuel and electricity price increases will feed into higher prices in various sectors, in turn pushing consumer price inflation above the South African Reserve Bank’s 3% target.

In our assessment interest rates will be maintained at the present level for the time being. Any cuts in 2026 are highly unlikely and increases this year cannot be ruled out. For households already stretched by two years of elevated living costs this represents a meaningful deterioration in real disposable income ― one that will show up in retail sales and consumer confidence data in the months ahead.

Since the formation of the government of national unity in June 2024, South Africa has benefited from a marked upswing in international markets and investor sentiment. By end-February the JSE all-share had surged to above 128,000 before dropping to 110,070 by March 20.

Higher gold ($5,300/oz in early March, dropping to $4,488 by March 20) and platinum prices further boosted JSE attractiveness and added some much-needed breathing room to the national fiscus.

Extra mining revenue delivered an additional R30bn-R40bn for the 2026/27 financial year fiscus. However, that buffer is conditional on commodity prices holding ― a fragile assumption in the present global environment, where trade policy uncertainty and slowing demand in markets such as China continue to weigh on metals and minerals.

With international market and investor sentiment ebbing, 2026 will show whether South Africa’s policy and legislative “reforms” have done enough to shift fixed investment onto a higher track or whether the country’s performance remains dependent on commodities and spending.

• Hattingh is executive director at the Centre for Risk Analysis.