It is welcome news that in the third quarter of 2025, the economy showed its fourth consecutive rise in economic activity, albeit off a low base.

In commenting on the 0,5% rise in the third quarter gross domestic product (GDP) growth, Prof. Raymond Parsons, economist from the North-West University (NWU) Business School, says this expected better growth trend confirms that a modest economic recovery is indeed underway.

He says it is driven by a combination of well-known favourable developments. “Another positive factor is the 1,6% rise in fixed capital formation, which is needed to achieve sustained job-rich growth. On present evidence, it seems likely that economic growth in 2026 will be about 1,4%, in line with the consensus forecast.”

According to Prof. Parsons, the vulnerabilities that remain in the growth outlook stem from the slower 0,5% GDP growth in the third quarter of 2025, compared to 0,9% in the previous quarter, the continued poor performance of manufacturing as a key lagging sector, and the expected negative impact of US import tariffs on the South African economy.

“The recovery in fixed capital formation, although positive, still leaves fixed capital investment at about 14% of GDP, which requires it to rise closer to 20% of GDP if the growth target of 3% of the GNU is to be realised in the medium term.”

Prof. Parsons says in the coming year, a sufficient number of firms must continue to feel that growth prospects justify their making fresh plans for expansion. “The green shoots of the current economic recovery and investor confidence must still be nurtured by favourable policy responses. The challenge remains to implement robust growth-friendly policies that will further build on the steadier foundation of the incipient economic upturn that has become apparent in 2025.”