South Africa’s economy is facing significant challenges, with an official unemployment rate of 33.6% in the second quarter of 2026, the highest level since August 2022. The expanded definition of unemployment, which includes discouraged job-seekers, puts the real figure at 43.8% of the labor force. Youth unemployment among those aged 15 to 24 stands at 60.9%, with 37.6% of young people not in employment, education, or training.
Despite six consecutive quarters of positive GDP growth, the economy is not recovering in a way that absorbs new entrants to the labor market or addresses the backlog of 8.5 million unemployed. The agricultural sector has been affected by foot and mouth disease, declared a national disaster in February 2026, with dairy sector losses exceeding R1 billion by mid-January 2026.
The State of the Economy
Freight rail is another area of concern, with the Richards Bay Coal Terminal’s design capacity of 91 million tonnes per annum not being met. In 2023, Transnet reduced the terminal’s capacity to 47.21 million tonnes, the lowest since 1992, due to locomotive shortages, cable theft, and state capture. The partial recovery to approximately 58 million tonnes in 2025 is seen as genuine progress, but it is still short of the terminal’s capacity.
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Crime statistics also tell a story of partial improvement, with murder declining by 9.5% in the fourth quarter of 2025/26 compared to the same period a year earlier. However, the fact that 5,181 people were still killed in a single quarter is a stark reminder of the challenges facing the country. Quarterly rape figures run at approximately 125 a day, with house robberies remaining at high volumes despite a 20.4% decline.
Semigration continues to reshape the country’s human capital map, with the Western Cape projected to receive approximately 500,000 interprovincial migrants between 2021 and 2026. This migration is driven by the search for better governance, with Western Cape residential prices rising 11% year-on-year in January 2026, compared to a national average of 7.8%.
Municipal Elections
The upcoming municipal elections on 4 November will determine the future of cities like Johannesburg and Pretoria. The ANC’s trajectory in Johannesburg is one of the most dramatic electoral collapses in South African democratic history, with the party’s support declining from 65.2% in 2000 to 37.1% in 2021. In Tshwane, the collapse is equally stark, with the ANC’s support declining from 67.9% to 34.8% over two decades.
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The latest polling makes clear that this trend has not reversed, with the DA leading in Johannesburg and Tshwane. The outcome of the election will have significant implications for business, as it will determine the direction of municipal governance and its impact on business operating costs. A stable, functional coalition in cities like Johannesburg could be transformative, addressing chronic failures like City Power and the R97.1 billion budget.
The tax and financial planning dimension of the election is critical, with municipal rates, electricity, and water charges being the fastest-growing cost in most business operating budgets. The revenue model of cities like Johannesburg depends on electricity, water, and property rates, which are determined by who runs the municipality and how competently they do it. As businesses invest in solar and embedded generation, they reduce their municipal electricity purchases, eroding the revenue base that cross-subsidizes essential services.
Implications for Business
The base case for businesses is continued above-inflation municipal tariff increases. Companies need to build this into their models and make decisions on embedded generation and water security. The question of where a business is located increasingly has a financial answer attached to it, with the gap between the cost of operating in a well-governed municipality and a poorly governed one widening.
