Is South Africa turning the corner? Data shows early signs of economic recovery
By Chris Hattingh
IS the South African economy finally turning the corner? Not yet — but early indicators suggest the possibility of a slow, fragile recovery. While the country’s economic fundamentals remain under strain, recent data shows signs that South Africa may be entering the first phase of a better growth, investment, and job-creation cycle.
South Africa’s GDP growth: encouraging but still insufficient
Between 2012 and 2023, South Africa’s GDP growth averaged just 0.8%, while population growth hovered between 1.3% and 1.5%. This means the average South African has grown poorer for more than a decade — and reversing that trend will require more than a few strong quarters of GDP performance.
Still, recent data shows a rare bout of upward momentum:
Q3 2025 GDP grew 0.5% quarter-on-quarter, marking the fourth consecutive quarter of expansion.
Q2 growth was revised upward from 0.8% to 0.9%.
Year-on-year, GDP expanded 2.1%, outperforming expectations of 1.8%.
Off a low base, this is the most encouraging top-line economic performance South Africa has seen in several years.
Business confidence improves as investment picks up – slightly
The improvement in sentiment is reflected in the RMB/BER Business Confidence Index, which climbed to 44 in Q4 2025, up from 39 in Q3. While still below the 50-point neutral level, the uptick means nearly half of respondents are satisfied with current business conditions.
Gross fixed capital formation — a key driver of long-term growth — also improved, rising 1.6% in Q3, breaking a streak of three consecutive quarterly declines.
But South Africa remains far from the levels needed to drive sustained economic expansion:
Fixed investment is stuck at roughly 14% of GDP.
The global average is around 26%.
The data shows that some capital is returning to the economy, but not enough to signal that private-sector confidence has fully recovered.
Small businesses remain under severe pressure
While macro indicators show modest improvement, the small business sector — responsible for millions of jobs — remains in distress.
According to Absa’s Small Business Growth Index:
Only 38% of small businesses believe they can survive another year under current conditions.
Just 24% fall into the “confidence” or “growth” categories.
This is alarming in a country where three million small businesses employ 13.4 million South Africans, out of a total employed workforce of 17 million.
GNU stability helps – but structural barriers still block growth
Some aspects of the Government of National Unity (GNU) are beginning to stabilise, which has helped support investor sentiment. Political and institutional stability is typically rewarded by markets.
However, stability alone cannot deliver the 3–5% annual growth needed to reduce unemployment and restore investor confidence. South Africa still faces deep structural problems:
Weak property rights
Inefficient trade and logistics systems
Slow reform implementation
Persistent electricity and water supply issues
Even with improving global sentiment toward emerging markets, South Africa must fix its fundamentals to unlock long-term growth.
Local Government Elections could reshape the economic outlook
The 2026/27 Local Government Elections will refocus national debate on service delivery, infrastructure, governance and cost-of-living pressures. The outcomes could directly influence the stability and policy direction of the GNU.
Johannesburg will be the key battleground — with major implications for Gauteng, the country’s economic powerhouse.
A fragile recovery: The pulse is there — but still weak
South Africa has shown notable economic resilience throughout 2025, and the latest data confirms the economy still has a pulse. But it is a weak pulse — not enough to fuel a sustained recovery without deeper reforms.
If current momentum holds and the GNU accelerates structural change, South Africa could enter the second half of the decade in a stronger position than in 2019 or 2020.
For now, the country stands at a crossroads. Early signs of improvement are emerging, but the real work of rebuilding the economy has only just begun.
