South Africa going from zero to hero

A recent slew of positive economic data shows that South Africa is on the mend, with the country having turned a corner.

If this positive momentum continues in the fourth quarter of 2025, South Africa will record its longest uninterrupted run of quarterly GDP expansions since before 2018.

This comes after the country’s economy has suffered over the past few decades, with South Africa’s economic growth averaging 0.8% over the past ten years.

This is nowhere near what the country needs to meaningfully improve unemployment or increase South Africans’ standard of living, and is far below the Government of National Unity’s 3% target.

The Bureau for Economic Research’s Karien Smuts said that, while South Africa’s real GDP growth eased to 0.5% quarter-on-quarter in the third quarter of 2025, it still marked the economy’s fourth consecutive quarter of positive growth.

“If GDP also increases in Q4 2025, it would be the longest uninterrupted run of quarterly expansions since before 2018,” she pointed out.

Another positive sign for South Africa’s economy was a slight upward revision to the second quarter GDP print, which went from 0.8% to 0.9% quarter on quarter.

Smuts explained that household consumption was the main driver of growth in the third quarter, with a 0.7% quarter-on-quarter expansion, which added 0.5 percentage points to growth. 

Economists have previously warned that South Africa is too reliant on household consumption to boost the economy, which is a highly cyclical and fragile growth driver.

Instead, South Africa should increase its gross fixed capital formation – investment in productive, fixed assets, such as infrastructure – to grow the economy sustainably.

This is something South Africa has severely neglected over the past decade, with fixed investment only constituting around 14% of GDP currently, when this figure should be closer to 20%.

However, the third quarter GDP data showed that this is also improving, with gross fixed capital formation turning positive with a 1.6% quarter-on-quarter expansion.

This added 0.2 percentage points to growth in the third quarter and came after a three-quarter streak of declining capex. 

The graphs below, courtesy of Stats SA, shows South Africa’s gross fixed capital formation (GFCF) growth rate from 2023 to now, and the contributions to GFCF growth in the third quarter of 2025, respectively.

Turning a corner

Economists have repeatedly emphasised the importance of the private sector in South Africa’s economic turnaround.

Following years of mismanagement and exorbitant spending, the government alone does not have the balance sheet to meaningfully invest in the economy and boost fixed capital formation.

Therefore, it will need to rely on the private sector, which has an estimated R1.8 trillion cash pile sitting on the sidelines, waiting to be deployed into the economy.

The government will still play an essential role, as it needs to implement growth-friendly policies and deregulation of key industries to encourage the private sector to take this cash off the sidelines.

In this regard, South Africa is also showing positive signs, with the RMB/BER Business Confidence Index (BCI) having risen by five points to 44 in the fourth quarter of 2025.

Smuts pointed out that this put business confidence three points above its long-term average, meaning 44% of respondents are satisfied with prevailing business conditions. 

“The rebound is notable for its breadth as confidence improved in five of the six sectors surveyed, with only building contractors registering weaker sentiment,” she said. 

“Taken together, the results suggest that the economy is regaining some momentum after remaining subdued in the middle of the year.”

Citadel chief economist Maarten Ackerman said the growth in fixed capital formation in the third quarter is possibly the most positive takeaway from the quarter.

“It may signal that private sector investment is beginning to return and that structural reform is taking hold,” Ackerman said, calling it a “turning point” for investment activity.

“With South Africa’s investment ratio at 14% of GDP, compared to 24% a decade ago, sustained improvement in this area remains essential for long-term economic progress.”

Ackerman said that if policy reform continues and fixed capital investment gains momentum, South Africa could sustainably lift its growth above current levels.