The AfDB released the 2026 Regional Economic Outlook for Southern Africa on Tuesday, warning that the region’s recovery remains too weak to significantly reduce unemployment, poverty and inequality.
The report projects regional growth rising from 2.1% in 2026 to 2.7% in 2027, supported by stronger household consumption and services. However, AfDB said limited diversification, weak agricultural productivity, infrastructure gaps and low domestic resource mobilisation continue to constrain long-term growth.
AfDB said Southern Africa faces an annual development financing shortfall of about $55 billion by 2030, with tighter global financial conditions and declining concessional aid adding pressure.
AfDB Director General for Southern Africa Kennedy Mbekeani said the region’s challenge is not only about the availability of money. “The challenge is not simply a shortage of money. It is mobilising, intermediating, and deploying the capital that already exists, effectively and at scale, in an increasingly fragmented global economy,” Mbekeani said.
AfDB Chief Economist and Vice-President for Economic Governance and Knowledge Management Kevin Urama called for the swift implementation of the New African Financial Architecture for Development, a continental initiative championed by AfDB President Sidi Ould Tah. “It is only through the effective implementation of the key building blocks of the new financial architecture that the continent can weather the financial storms and increased volatilities and uncertainties that come with the ongoing fragmentation in the global financial markets,” Urama said.
The report found that gross capital formation in Southern Africa fell to around 18.6% of gross domestic product (GDP) by 2025, below levels needed for structural transformation in middle-income economies.
Inflation is easing, falling from 26.1% in 2024 to 12.3% in 2025, with a further decline to 8.4% expected in 2026. However, AfDB warned that fiscal deficits, rising debt, external imbalances and climate shocks continue to limit policy space.
The report identifies untapped capital sources, including diaspora remittances, pension funds, insurance assets, sovereign funds, capital markets and natural resource wealth.
AfDB said countries should strengthen tax systems, reduce illicit financial flows, improve public financial management, expand blended finance and mobilise institutional capital through public-private partnerships.
AfDB also released its 2026 South Africa (SA) Country Focus Report, which found that SA’s growth rose from 0.5% in 2024 to 1.1% in 2025. Growth is projected at 1.2% in 2026 and 1.6% in 2027, supported by improved electricity supply and Operation Vulindlela reforms.
However, AfDB said electricity and water shortages, freight and port inefficiencies, high unemployment and exposure to global risks continue to weigh on the outlook. SA’s unemployment rate remains high at 31.4%, while public debt is expected to peak at 78.9% of GDP in 2025/26.
Speaking on behalf of the National Treasury, Hendrik Oosthuizen said global fragmentation also creates opportunities. “Fragmentation in the global economy is not simply a threat to South Africa. It is also an opening,” Oosthuizen said.
Oosthuizen said countries that succeed will be those able to mobilise domestic capital and attract external investment through sound governance and credible institutions.
–AfDB/ChannelAfrica–
