South Africa Economic Outlook 2025

Local business leaders responding to the survey for the World Economic Forum (WEF) Global Risks Report 2025 identified energy and water supply shortages among South Africa’s biggest risk factors over the next two years, while global results included extreme weather events as a top-three risk. 

• Energy disruptions: Even after electricity load-shedding was suspended in March 2024, they feared energy shortages as a key challenge in 2025-2026. Despite the absence of planned power outages for most of last year, business leaders likely remained concerned about electricity cuts due to continued large volumes of unplanned generation breakdowns near 12,000 MW. Elsewhere, their concerns extended to jet fuel and gas shortages, with the country seeing increased dependency on energy imports. South African companies facing electricity and gas shortages need an energy action plan. Since load-shedding began, many have reduced dependence on public power and imported hydrocarbons. A comprehensive energy strategy includes energy efficiency measures, renewable energy investments and alternative fuel generators. An energy audit is crucial to identify efficiency opportunities and cost savings, ensuring reduced reliance on traditional energy sources.
• Water shortages: Nearly half of the country’s municipal water supply systems (WSSs) performed poorly or at a critical condition in 2023 due to multiple reasons. These systems are experiencing increasing levels of non-revenue water—the difference between the amount of water injected into the water-supply system and the actual amount of water billed to customers. Operational risks, financial strain and supply chain disruptions are some of the adverse impacts that the country’s businesses and other organisations are experiencing as a result. To mitigate water supply risks, businesses can recover, recapture and reuse water, implement backup systems and harvest rainwater and greywater. Conducting a water risk and usage baseline assessment is crucial for developing a water strategy. Collaborating with the public sector can address infrastructure and related service delivery challenges. In a broader economic context, improved natural capital management could result in water and biodiversity making a larger contribution to the country’s labour productivity. 

• Extreme weather: Climate factors like heat stress and drought can adversely impact the production of, for example, essential commodities like food products and minerals. Droughts have already affected mining in South Africa, with the industry having faced a severe drought in 2015–2017, when water scarcity led to mine closures and job losses. Workers are concerned: PwC’s Global Workforce Hopes and Fears Survey 2024 found that nearly half (44%) of South African respondents believe that disruptions from extreme weather events will impact their ability to do their job. Responding to risks associated with extreme weather requires three steps. Firstly, identifying physical and transition risks across different climate change scenarios is essential for businesses to prepare for future uncertainties, as these risks can directly impact assets and productivity. Secondly, evaluating a business's vulnerability to climate change involves assessing the exposure and sensitivity of its assets, infrastructure, operations and strategy, helping to prioritise areas for intervention. Finally, designing effective adaptation solutions requires a comprehensive approach that considers technological, nature-based, and behavioral options, while also monitoring for potential maladaptive solutions that could inadvertently increase vulnerability.