Neelam Rahim | neelam@radioislam.co.za
3-minute read | 22 December 2025

📷 After a tough 2025, economists say easing inflation and stronger markets may offer cautious hope for South Africa’s economy in 2026. Image Credits: Elif Bayraktar / Getty Images

South Africa’s economy weathered a challenging 2025, characterised by weak growth, rising unemployment and political uncertainty, leaving many citizens frustrated and economically strained. However, economists believe there are early signs of cautious optimism for 2026, provided governance improves and long-standing structural challenges are addressed.

Speaking on Radio Islam International, Wits Business School Professor Jannie Rossouw described 2025 as “economically speaking, a difficult year,” highlighting that economic growth once again failed to keep pace with population growth. This imbalance, he said, “led to increased unemployment,” deepening inequality and hardship for many South Africans.

One of the defining features of the year was the turbulent national budget process. Prof Rossouw reminded listeners that “only the third attempt to have a national budget was passed by Parliament,” after two failed budget attempts triggered intense political debate and market uncertainty. Central to this was the proposed VAT hike, which the ANC attempted to introduce without securing agreement from its partners in the Government of National Unity (GNU).

“This vividly showed the ANC that they are no longer exclusively in power,” Prof Rossouw said, adding that the episode sent a strong signal about the need for consultation and accountability. He expressed hope that the ruling party would carry these lessons forward into 2026.

Despite the difficult economic climate, financial markets proved to be a rare bright spot. “The JSE performed very, very well,” Prof Rossouw noted, pointing out that the All-Share Index rose from below 100,000 points to above 110,000. Bond yields also declined, suggesting improved investor confidence, though he cautioned that it was “too soon to reach any final conclusion” about sustained recovery.

Another unexpected development was the resilience of the rand. While the stronger currency helped contain inflation and enabled the announcement of a lower inflation target of 3%, Prof Rossouw warned that it also made exports less competitive, placing additional pressure on local manufacturers and exporters.

Externally, South Africa faces growing risks from the United States. President Donald Trump’s 30% tariff hikes were described as “the biggest external threat to our economy,” already impacting South African exports. Rossouw cautioned that exclusion from the AGOA trade agreement would be “as serious a blow,” urging the government to urgently appoint a new ambassador to Washington after the position remained vacant for nearly a year.

Looking ahead, Prof Rossouw said confidence indicators suggest a gradual improvement in sentiment. “The mood in South Africa is improving,” he said, adding that lower inflation and potential interest rate cuts could support growth in 2026 provided policy reform, accountability and effective governance remain priorities.

Listen to the full interview on Sabahul Muslim with Mufti Yusuf Moosagie and Professor Jannie Rossouw.