South Africa has hit rock bottom

South Africa’s economy appears to be bottoming out, with a decade of stagnation coming to an end amid renewed optimism in the country’s prospects. 

However, any recovery in South Africa’s economic fortunes is expected to be gradual, with significantly faster growth still requiring major changes. 

The important thing is that those reforms and changes that will drive faster economic growth are happening, albeit at a slow pace. 

This is feedback from Econometrix chief economist Dr Azar Jammine, who explained that while optimism in South Africa’s economy surged in 2025, growth remains too slow to meaningfully tackle the country’s unemployment crisis. 

“I think saying South Africa’s economy is out of the woods is an overly strong statement. There are still huge challenges to be confronted,” Jammine told CNBC Africa. 

“All that we can say at this time is that there are signs that maybe we have seen the worst and that things are starting to improve gradually. The emphasis is on ‘gradually’.”

Jammine explained that South Africa’s economic growth is nowhere near fast enough for it to provide the number of jobs required to meaningfully address its unemployment crisis. 

South Africa has a very strong job coefficient, with most economists calculating that around 100,000 jobs are created for every percentage point of economic growth.

Around 600,000 individuals enter the labour market every year, while the country’s stagnant economy only produces 100,000 jobs. This results in unemployment steadily rising. 

However, Jammine said things are no longer getting worse, with the country having hit rock bottom and now beginning to slowly improve. 

“At least we can say that things are not getting worse and there are positive signs that make one believe that things could gradually start improving from now on,” Jammine said. 

These signs include the apparent end of load-shedding in South Africa, with the country not experiencing sustained power cuts for the past 18 months. 

The National Treasury’s policy of fiscal consolidation also appears to be bearing fruit, with the state’s debt burden expected to peak in the current financial year and steadily decline thereafter. 

Jammine said these factors, coupled with the progress made on reforms in other areas, indicate that South Africa’s economy has bottomed out and is now no longer on the decline. 

One number everyone is watching

For economic growth to accelerate and be sustained, there needs to be an uptick in gross fixed capital formation or fixed investment. 

This refers to investment in machinery, equipment, and infrastructure which enhance the productivity of the workforce and economy. 

Investment of this kind has been lacklustre in South Africa in recent years, with it steadily declining since 2022, and it remains far below the levels seen in its emerging market peers. 

As a result, the country’s economy has slowed and stagnated, while growth in other emerging markets has been significantly higher, averaging around 4.5% annually over the past decade. 

“We have got to start seeing a consistent pick up in investment in South Africa. That is the only way growth can be sustained at a high level,” Jammine said. 

“People were encouraged by the fact that in the third quarter of 2025, for only the second time in two and a half years, we saw a report of a slight improvement in actual investment in machinery, equipment, and infrastructure.”

“That is what is vitally needed to uplift economic growth. Businesses had been depressed for a long while, seeing levels of investment consistently declining. Now we have had this little green shoot.” 

Jammine said this has to be sustained quarter-on-quarter and year-on-year for the country’s economy to grow substantially faster. 

Only through his can the country make a meaningful impact on its unemployment crisis, by absorbing some of the millions of individuals without jobs. 

Nearly half of all the unemployed individuals in South Africa are new entrants to the labour market, while those who actually lost their jobs or left employment only make up 25%. 

Jammine said that there is no indication that growth in fixed investment will be sustained, with the recovery being extremely fragile. 

“All of these hits from missteps and criminal activities that we have been seeing are not conducive towards building up more confidence for businesses to invest,” Jammine said. 

“The government needs to come to the party more effectively in collaborating with the private sector to see growth pick up further. There are signs that this is happening.”