It’s easy to roll one’s eyes in response to the ANC’s January 8 statement, the various lekgotlas, and the upcoming state of the nation address (Sona). Given the resource and capacity constraints in local government, the ANC has left it too late to effect real change before the year‑end elections. That isn’t to say the new local government war room won’t seal the odd pothole, though I have faith in the electorate’s ability to see through such gestures.
For all the outcry over the National Treasury clawing back money, many municipalities can’t spend it. It’s hard to pin down the precise extent of the underspend because it’s a moving target, but municipalities could ideally be investing about R100bn more annually, mainly on infrastructure.
Regarding growth drivers, municipalities as a collective seem unlikely to be a key factor in driving economic growth over the next five years. Yet this underestimates how shifts in major metros could drive sentiment and investment.
The scale of South Africa’s investment shortfall is underappreciated.
Johannesburg is the most obvious example. I spend much time talking to executives about the condition of the city — far beyond their actual business exposure — simply because they and many staff live there. It’s therefore interesting to consider the upside risk to 2027 growth if sentiment regarding the city turns a corner and drives private investment. The flipside holds too — the despondency may deepen if the status quo persists and new coalitions remain impossible.
The scale of South Africa’s investment shortfall is underappreciated. Most people will need to reread this sentence: in the third quarter of 2025 total investment in real terms was 14.4% lower than in the same quarter of 2019. That screams crisis, yet it is barely recognised. That is true across the public and private sectors — the latter is down about 15.7%.
Given the rapid investment in electricity as reforms in the sector accelerate, all other investment implies a contraction closer to 30%. Investment never fully recovered after Covid-19 and has shrunk again over the past two years.
Macroeconomic reforms and a lower, flatter yield curve should support stronger investment — but only if sentiment improves enough for firms to cross the lower breakeven threshold implied by bond yields. Yet a key concern I’ve raised with investors is that this may not occur over the next two years.
Progress takes time
While logistics reforms are progressing, Transnet still misses its own volume targets; we estimate it will remain a drag until throughput reaches about 190-million tonnes annually, perhaps in two to three years. Third‑party access won’t reach scale for about five years, and concessioning is likely to affect the economy only after 2029 given the complexity of these deals.
Meanwhile, electricity reforms are stalling or even threatening to reverse, despite the capital that a reformed market could unlock. Project pipelines are stretched and are not yet contributing meaningfully to growth. Policy decisions also risk locking us into suboptimal designs — particularly about Eskom’s future — that could prove hard to undo.
All of this matters because we now operate in a more dangerous, transactional and multibilateral world. The rule of law was once upheld by consensus in a hegemonic order; that era has passed, and countries must now guard their own interests.
South Africa’s economic reform argument is usually made as a self‑evident truth — remove blockages because they are blockages. Fair enough, but it misses the broader point: reforms are a geostrategic risk‑mitigation imperative. In this new order, South Africa must take a self‑interested approach to derisking.
More efficient ports and rail are vital for trade with a wider range of partners. Supply chains with the US have focused on exports and diversification, but import diversification will matter as much. Unlike exports, which are concentrated in a few goods, imports span a vast spectrum — including critical inputs such as technology and reagents — a perspective the department of trade, industry & competition hasn’t yet adopted.
Electricity reforms are equally vital to strengthen energy independence; South Africa still imports significant hydrocarbon products from the US.
Leveraging AfCFTA
In a riskier, more diversified world, competition will sharpen as countries chase new markets. Lower input costs — through cheaper logistics, reduced non‑tariff barriers, affordable electricity and higher‑value labour (more productive rather than merely cheaper) — will define comparative advantage.
South Africa must clearly define and form coalitions of partners around its strengths — accelerating the African Continental Free Trade Area (AfCFTA) to open wider markets and recognising that its role in critical minerals is not as important as much of the marketing suggests.
The machinery to think and act this way has been eroded. With numerous international relations & co-operation department missions lacking ambassadors and trade & industry’s retreat from foreign postings, South Africa lacks the capacity and agility to build the relationships and coalitions required in a reshaped global economy.
There’s been much navel‑gazing about Davos, and talk of a “less Western” foreign policy, but this is meaningless without the machinery to deliver the diplomatic, trade and investment relationships to make it work. Peppering such ideas into the Sona would not provoke the usual eye‑rolling. In this environment, a more self‑interested stance means rapidly signing trade and investment deals across markets, with the EU as a natural priority.
The real question is: how many people across government — in the Treasury, the trade, industry & competition department and beyond — actually think this way? How many in business do? After all, it’s not only the government’s job. Business, too, must lift its gaze from narrow reform checklists or municipal election cycles and treat trade and investment diversification as a national imperative — and help broaden the strategic thinking across the public sector.
• Attard Montalto leads on political economy, markets and the just energy transition at Krutham, a South African research-led consulting company.