A strong rally in commodities such as gold, platinum, rhodium and palladium is creating significant opportunities for South Africa to strengthen its economic recovery.
Speaking at AfriSam’s annual Budget Breakfast event in Sandton in February, Econometrix Chief Economist Dr Azar Jammine said the surge in commodity prices could have an “absolutely enormous” impact on the country’s economic outlook.
AfriSam Budget Breakfast Grows as Industry Platform
This year marked the eighth consecutive AfriSam Annual Budget Breakdown Breakfast. The event brings together stakeholders from across the construction and infrastructure sectors.
Attendance has continued to grow each year, highlighting the event’s increasing role as a platform for industry insight, economic analysis and sector engagement.
Commodity Inflows Present Major Opportunity
Dr Jammine highlighted that South Africa could see an estimated inflow of around R350 billion from commodity sales. This influx arrives at a time when the economy has begun showing early signs of recovery following years of slow growth.
South Africa has lagged behind global economic growth for much of the past decade, contributing to a decline in living standards of between 6% and 7% over the last eight years.
He noted that the real opportunity now lies in directing this windfall toward higher levels of fixed capital formation through targeted infrastructure investment.
“If this can be converted into real investment in new exploration and development in the mining sector, the knock-on effects through the rest of the economy could be unbelievable,” he said.
Signs of Economic Improvement
The third quarter of 2025 recorded a modest increase in fixed investment of 1.1%, marking the first positive movement in two and a half years.
Dr Jammine also pointed to the Medium-Term Budget Policy Statement released in November 2025, which suggested that the Government of National Unity was beginning to deliver positive outcomes, particularly through its focus on fiscal discipline.
Higher commodity earnings have also strengthened the rand against the US dollar. This has helped reduce inflation to approximately 3.5%, supporting government’s lower inflation target of 3%.
Lower inflation expectations have also contributed to declining long-term interest rates.
“This has meant that long-term interest rates have declined, resulting in considerable savings for government in terms of interest payments on its debt,” Dr Jammine explained.
International confidence has also improved, with ratings agency S&P Global upgrading South Africa’s credit rating for the first time in 16 years.
Construction Sector Still Under Pressure
Despite improving economic indicators, the construction sector remains under significant strain after years of limited infrastructure investment.
“Construction, comprising both building and civil engineering, is still about 30% below where it was in 2010,” Dr Jammine said. “By contrast, the agricultural sector is about 70% higher than its 2010 level.”
Employment in construction has also declined, dropping by around 5% since 2019. This places the sector among the weakest performers in the broader economy.
Infrastructure Decline Linked to State-Owned Enterprises
Dr Jammine attributed much of the decline in gross fixed capital formation to challenges within state-owned enterprises.
He argued that deteriorating infrastructure and procurement failures, often linked to the era of state capture, had undermined economic growth.
Crime and corruption, he added, remain key obstacles that must be addressed to unlock future investment.
Investment Outlook for Construction and Mining
Although private sector investment has not been particularly strong, Dr Jammine noted that it has continued to grow gradually.
Residential building plan approvals remain subdued, currently sitting between 40% and 50% below their peak levels.
Non-residential building approvals have declined even more sharply, falling around 85% below the peak seen a decade ago. This downturn was compounded by the Covid-19 pandemic, which further disrupted construction activity.
Despite these challenges, Dr Jammine believes renewed investment in mining and infrastructure could provide a much-needed boost to the construction industry.
For construction materials companies such as AfriSam, increased infrastructure and development activity would create significant opportunities, particularly in supplying cement, aggregates and readymix concrete to major projects.
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