Improvements in South Africa’s infrastructure are changing where economic growth is constrained, but progress in one part of the system does not automatically translate into investment, production, exports, and jobs, according to PwC.
The company’s latest South Africa Economic Outlook: Q3 2026 introduces a Growth Conversion Map showing how the limiting point is shifting across electricity, freight, and water systems, and why businesses need to identify the specific weak links affecting their sites, suppliers, corridors, utilities, and customer markets.
Amid these developments, PwC forecasts real GDP growth of 1,1% in 2026 and 1,3% in 2027. Elevated inflation and interest rates continue to weigh on activity, suggesting that the recovery is likely to remain gradual rather than broad-based. These forecasts provide the macroeconomic context for the report’s central question: whether improving infrastructure conditions can be converted into productive investment and stronger economic activity.
Economic growth remains fragile and uneven
PwC’s Economic Pulse reinforces the need to look beyond a single headline growth number. The overall health of the economy scores 4.6 out of 10, while momentum stands at 2.3 out of 10, with 11 of the 16 scored components losing momentum. GDP contracted by 0,2% quarter-on-quarter in Q2 2026, although output remained 0,9% higher year-on-year, illustrating the fragile and uneven conditions in which infrastructure improvements must be converted into productive activity.
There are nevertheless areas of resilience. New vehicle sales increased 11,4% year-on-year in August, exports grew 5,8% year-on-year, and the merchandise trade position remains supportive. At the same time, industrial activity, business confidence, and real household income remain under pressure.
“South Africa’s economy continues to demonstrate resilience, but stronger growth will require us to convert improving conditions into productive economic activity,” says Lullu Krugel, chief economist and Africa Sustainability leader at PwC South Africa. “We are seeing meaningful progress in areas that have constrained the economy for several years. The opportunity now is to build on that progress and ensure it translates into stronger investment, production, and employment.”
South Africa’s infrastructure bottleneck is moving
PwC’s Growth Conversion Map shows that infrastructure bottlenecks are closely interconnected. Easing a constraint in one area can expose another elsewhere in the system. More electricity generation, for example, still requires sufficient transmission and grid capacity, just as increased mining output depends on efficient rail and ports. In agriculture, higher production needs to be supported by processing, logistics, and access to markets. The key constraint therefore varies across sectors and locations.
Electricity provides the clearest example. Eskom’s Energy Availability Factor increased from 54,56% in FY2024 to 65,16% in FY2026, while the utility completed 365 consecutive days without load-shedding in May 2026. However, transmission-line delivery reached 64% of the FY2026 plan. As generation reliability improves, transmission, grid connections, and distribution are becoming increasingly important in determining whether available power reaches the point where it is needed.
Freight presents a different picture. Rail freight volumes increased 5,5% to 160,1-million tonnes in 2024/25 but remain 36% below the government’s 250-million tonne end-of-decade target. Water also remains constrained, with national non-revenue water at approximately 47,3%, although the reliability experienced by businesses differs across utilities and locations.
“The challenge is no longer simply about whether infrastructure is improving at a national level,” says Dirk Mostert, associate director and lead economist: Sustainability at PwC South Africa. “Businesses experience infrastructure through specific networks, corridors, utilities, and sites. Progress in one area can increase economic potential, but another weak link can still prevent that potential from translating into economic activity.”
Different industries face different constraints
The report examines mining, manufacturing, agriculture and agro-processing, and tourism and hospitality to demonstrate that the same national infrastructure improvement can produce different economic outcomes across industries. Each industry depends on a distinct chain of enabling conditions, and growth can be held back wherever that chain is weakest.
For mining, greater production capability needs to be matched by sufficient rail and port capacity to reach export markets. Manufacturing requires electricity, water, inputs, and logistics to function reliably together, with large manufacturers using 76,6% of production capacity in May 2026, compared with 77,8% a year earlier.
In agriculture and agro-processing, stronger primary production also needs to move through processing, cold chains, logistics, and market access to create greater downstream value.
Tourism and hospitality present another growth opportunity. South Africa recorded approximately 10,48-million international arrivals in 2025, compared with a target of 15-million by 2030. PwC calculates that closing the 4,52-million visitor gap at the published average foreign direct spend of approximately R10 400 per tourist would equate to around R47-billion in additional gross visitor expenditure. This is an illustrative gross-spend scenario, rather than a forecast or GDP estimate.
From resilience to productive investment
South African businesses have adapted to infrastructure challenges by absorbing additional costs, building operational buffers, investing in backup services, and reconfiguring supply chains and operations. These actions can protect existing activity, but they do not necessarily create additional productive capacity.
PwC therefore highlights an important distinction between capital used to protect existing operations and capital directed towards productivity and growth. As infrastructure conditions improve, creating sufficient operating reliability and confidence for businesses to increase productive and expansionary investment will be important for stronger economic growth.
Following the constraint through the business
For business leaders, the report recommends moving beyond national infrastructure indicators to map how constraints affect their own sites, suppliers, corridors, utilities, and customer markets. This means identifying the weakest link in each critical operating chain, testing the infrastructure assumptions underpinning investment decisions, and defining indicators that signal when the constraint has shifted.
PwC identifies five questions for businesses:
- Where can system capacity fail to reach our operations?
- Which infrastructure assumption is carrying the business case?
- How much capital is protecting existing operations rather than creating new capacity?
- Which indicators would tell us that the constraint is moving again?
- What will we do if a trigger is breached?
In the longer term, national infrastructure reform remains essential. Stronger growth, however, depends on whether improvements move through networks, corridors, and local operating environments to the businesses and industries that convert them into investment, production, and employment. The critical question is therefore not only whether national capacity is improving, but whether the full chain of enabling conditions is sufficiently reliable for businesses to use that capacity productively.
“Improving infrastructure creates economic potential, but sustainable growth is realised when businesses can use that capacity with sufficient reliability and confidence to invest,” says Krugel. “If South Africa can strengthen the links between reform, implementation, and the operating environment there is an opportunity to translate the progress already achieved into stronger investment, productivity, and jobs.”