With all eyes on Davos and what’s happening in the West, anxiety is rising. Talk of blanket tariffs, geopolitical conflict and the “squeezing” of smaller nations makes the natural impulse to brace for impact. For South African investors, those headlines can feel like an assault on a recovery that has only just begun.
But while the economic powerhouses try to outmanoeuvre one another, South Africa has been proactive: it has started getting the basics stable again, which is vital because in a more defensive world, credibility is a form of protection.
Here are some of South Africa’s power moves:
- Inflation is finally sensible
The South African Reserve Bank is now working towards a 3% inflation target. Average inflation for 2025 came in at 3.2% – the lowest in 21 years – and headline inflation ended December 2025 at 3.6%. After a decade where inflation often sat stubbornly near the top of the old band, this is a meaningful reset. It creates a more predictable environment for households, businesses, and investors to plan around.
- Interest-rate cuts are where credibility is tested
With inflation closer to target, SARB doesn’t need to keep policy “emergency tight” to stop runaway prices. But it also can’t cut quickly, because it has to prove this lower-inflation era will stay. Real rates are still meaningfully positive – interest rates are still clearly higher than inflation. That gives the country a buffer if global conditions worsen. It also supports the rand in nervous periods, because higher local rates give offshore investors a reason to keep funds in South Africa rather than pulling them out at the first sign of trouble.
- Electricity stability is the most important structural shift
Since 2007, loadshedding hit households, wrecked planning, pushed up costs, and put investment decisions at risk. Eskom says the country has had a 245-day consecutive stretch without “interrupted supply”, with limited loadshedding recorded during parts of the past financial year. Investors will still want to know: how much of this improvement is durable supply, and how much is lower demand, rooftop solar, and load shifting? Either way, fewer disruptions change real economic behaviour – you can plan, you can produce, and you can invest with less fear of being blindsided.
- Fiscal discipline is improving, but the bill is still large
South Africa has now posted primary budget surpluses in two consecutive fiscal years, meaning revenue covered non-interest spending. That bolsters Treasury’s credibility and supports a more defensible debt path. But it should not be read as more reason to spend while debt-service costs remain so high. Being disciplined now is important because it limits later surprises.
- Compliance stigma is easing, with practical consequences
South Africa exited the Financial Action Task Force grey list on 24 October last year. Soon after, S&P upgraded South Africa’s foreign-currency rating to BB from BB-, pointing to improved political stability, an improved fiscal trajectory and reform momentum. This month, the EU removed South Africa from its “High-Risk Third Country Jurisdictions” list. These moves won’t make cross-border payments effortless overnight, but they do reduce the background suspicion that has made legitimate international payments more painful than they needed to be.
- The reality check: growth is still weak
Growth remains our Achilles’ heel. GDP is projected to grow by around 1.4% to 1.5% in 2026 – well below the Sub-Saharan African average (4.3%) and the emerging market average (4.2%). That is simply not fast enough to make a meaningful dent in unemployment or lift living standards.
- The takeaway: the basics are the hedge
The reasons for weak growth are mostly home-grown: logistics and infrastructure bottlenecks, low fixed investment, and an economy that struggles to absorb people into work. This is why the most important reforms are those that are basic: low and predictable inflation, stable electricity, credible public finances, and strong compliance systems.
As Canadian Prime Minister Mark Carney noted in his Davos keynote, in a fragmented world the countries “not at the table” risk ending up “on the menu”. South Africa cannot control tariffs, shipping lanes, or the next geopolitical crisis. What it can control is whether it remains a country that looks organised and reliable.
Measured optimism is justified, but only if we keep doing the work. Laying the table for investment is what keeps South Africa taken seriously when conditions get tougher – and stops us being the country investors and banks quietly sidestep when they start getting cautious.