Review of the SA economy and the upcoming municipal elections

Youth unemployment among those aged 15 to 24 stands at 60.9% (Q1 2026). Meanwhile, 37.6% of young people aged 15 to 24 are not in employment, education or training at all. These are not rounding errors in an otherwise improving story. They are the story.

Yes, there have been six consecutive quarters of positive GDP growth, the FATF grey list is behind us, and business confidence slipped back to 39 on the BER index in the second quarter of 2026. These are real. But 1.1% growth in 2025 doesn’t absorb new entrants to the labour market, let alone the backlog of 8.5 million unemployed. The economy is not in freefall. It is also not recovering in any way those 8.5 million would recognise.

The real cost of living in a failing state

The agricultural sector, which many South Africans regard as peripheral to the urban economy, has been quietly absorbing a catastrophe. Foot and mouth disease (FMD) – declared a national disaster in February 2026 – has spread to eight of nine provinces. By January 2026, more than 210,000 dairy cattle were affected across 90 farms. Dairy sector losses exceeded R1bn by mid-January alone, with per-cow losses averaging R5,000. Export revenue losses from three waves of FMD between 2019 and 2025 already exceed R821m; BFAP projects cumulative losses could reach R2.6bn by year-end and R25.6bn over the next decade under a sustained high-burden scenario.

The government’s response – vaccine shortages, bureaucratic delays, movement controls that prevented farmers from acting themselves – is municipal governance failure in agricultural form.

Then there is freight rail – the crisis that does not make the investor presentation. Richards Bay Coal Terminal has a design capacity of 91 million tonnes per annum. In 2017 it moved 76.47 million tonnes. By 2023, Transnet had reduced that to 47.21 million tonnes – the lowest since 1992 – through locomotive shortages, cable theft and the accumulated damage of state capture. Every tonne not exported is royalties, corporate tax and export earnings the fiscus does not collect. The partial recovery to approximately 58 million tonnes in 2025 under new Transnet management is genuine progress. But 58 million tonnes against a 91 million tonne facility – with SARS watching the gap – is not a recovery story. It is a damage report with cautious optimism attached.

Crime statistics tell a similar story of partial improvement obscuring a deeply abnormal baseline. Murder declined by 9.5% in the fourth quarter of 2025/26 compared with the same period a year earlier – which sounds encouraging until the realization that 5,181 people were still killed in a single quarter hits home. That is 58 murders a day. Quarterly rape figures run at approximately 125 a day. House robberies, though down 20.4%, remain at volumes that would constitute a national emergency in any comparable economy. The murder decline is contested by analysts who question whether it reflects real improvement or methodology changes.

Semigration continues to reshape the country’s human capital map in ways that compound every other problem. Between 2021 and 2026, the Western Cape is projected to receive approximately 500,000 interprovincial migrants – people who have, in most cases, concluded that better governance is worth the cost of relocation. Western Cape residential prices rose 11% year-on-year in January 2026 against a national average of 7.8%. The capital, the skills, the tax revenue – all of it follows competent administration. Johannesburg and Pretoria are on the wrong side of that equation right now, and the 4 November elections will determine whether they remain there.

The Joburg and Pretoria vote: What the curves actually show

The ANC’s trajectory in Johannesburg is one of the most dramatic electoral collapses in South African democratic history, and it is accelerating. In December 2000, the ANC took 65.2% of the proportional representation vote in the City of Johannesburg. By 2011 it was still at 58.5%. Then the slide became a cliff: 44.6% in 2016, 37.1% in 2021. In Tshwane (Pretoria), the collapse is equally stark – from an all-time high of 67.9% to 34.8% in 2021, a drop of 33 percentage points over two decades, with the sharpest falls in the last ten years.

The 2026 polling makes clear this trend has not reversed. The most recent Social Research Foundation and Common Sense polling (Q2 2026, conducted among 504 registered voters in Johannesburg and 508 in Tshwane) gives the DA 39% in Johannesburg against the ANC’s 27%, with the EFF on 9%, ActionSA on 10% and MKP on 6%. In Tshwane, the DA leads at 41% against the ANC’s 27%, with ActionSA on 7% and the EFF on 11%. Independent analyst modelling based on ward-level data broadly corroborates these figures. The ANC is not competitive for the mayoralty in either city. The question is what replaces it.

That question matters enormously for business. Johannesburg contributes about 16% of South Africa’s GDP (Gauteng province as a whole contributes roughly a third). A stable, functional coalition in the city – one capable of addressing City Power’s chronic failures, the R97.1bn budget that just raised electricity by 8.6% and water by 11%, and an infrastructure backlog measured in decades – would be transformative. A fractious coalition that replicates the instability of the 2021–2026 cycle, where the ANC and EFF governed by deal before the DA returned, would not.

Helen Zille has been announced as the DA’s mayoral candidate for Johannesburg, a signal of how seriously the party takes the prize and how much of its political capital is riding on the outcome. In Tshwane, the DA’s Cilliers Brink – its mayoral candidate after being removed as mayor in September 2024 – is polling within touching distance of an outright majority.

The tax and financial planning dimension

Here is the part that a tax practitioner wants you to think about. Municipal rates, electricity and water charges are not line items to be managed passively. They are now the fastest-growing cost in most business operating budgets, and their trajectory is determined almost entirely by who runs the municipality and how competently they do it. Johannesburg’s 2026/27 budget of R97.1bn is one of the largest in Africa south of the equator.

The revenue model depends on electricity at R27.8bn, water and wastewater at R21.5bn, and property rates at R18.8bn. Those numbers are what they are because the city cannot collect efficiently from its non-paying base and has historically cross-subsidised everything from a shrinking pool of compliant ratepayers – which is to say, from businesses like yours.

The structural problem deepening beneath the surface: as businesses and middle-income households invest in solar and embedded generation – rationally, because municipal electricity costs more and is less reliable – they reduce their municipal electricity purchases. This erodes the revenue base that cross-subsidises roads, parks, clinics and administration. In response, municipalities raise tariffs.

This drives more adoption of alternatives. Which further erodes the base. Johannesburg and Tshwane are both in this spiral now. Better governance is the only intervention that breaks it: revenue collection from the non-paying base, infrastructure maintenance that makes the municipal product worth buying, administrative efficiency that reduces waste. None of that is possible under dysfunctional coalition politics.

For businesses doing their planning: the base case, regardless of outcome, is continued above-inflation municipal tariff increases. Build that into your models. The embedded generation and water security decisions that have been deferred need to be made. The question of where your business is located – historically treated as fixed – increasingly has a financial answer attached to it. The gap between the cost of operating in a well-governed municipality and a poorly governed one is widening, and it shows up in your rates account, your insurance premiums and your security costs.

On 4 November, approximately one million people are expected to vote in Johannesburg alone. Youth turnout will again be low – the same generation facing 60.9% unemployment, standing to benefit most from better governance, remains the least likely to vote for it. The cost of that disengagement is paid in municipal budgets, and in business operating costs, for years onto the future.

South Africa’s national reform story is real. The macro numbers are not invented. But the economy is experienced locally, and local government is where the reform story either lands or doesn’t. The 4 November vote in Johannesburg and Pretoria is, in practical economic terms, the most consequential domestic event of the year for business. Not because of who wins, but because of what they do with it the day after.

If you would like to discuss the tax and financial planning implications of the current economic and political environment – including business cost structures, municipal exposure, and location planning – we can assist. Contact Bashier Adam | 012 682 8800 | az.oc.tbas-aixen@reihsab.