South Africa, July 29/APO Group: Southern Africa must urgently mobilise development financing at scale to turn a gradual and uneven economic recovery into real gains in living standards. This is according to the African Development Bank’s 2026 Regional Economic Outlook for Southern Africa: Mobilising Southern Africa’s Development Financing at Scale in a Fragmented World, released on Tuesday.
The report projects regional growth, expected to rise from 2.1 percent in 2026 to 2.7 percent in 2027, on the back of stronger household consumption and services. However, limited diversification, weak agricultural productivity, infrastructure gaps, and low domestic resource mobilization act as impediments to long-term growth and resilience, trimming gains in GDP per capita and efforts to tackle entrenched economic disparities.
Southern Africa’s development challenge is not simply a shortage of resources, but rather persistent constraints in mobilizing, intermediating, and deploying available capital effectively and at scale.
“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,” commented the African Development Bank’s Director General for Southern Africa Kennedy Mbekeani.
The Bank’s Chief Economist and Vice-President for Economic Governance and Knowledge Management, Kevin Urama, urged regional leaders to swiftly implement the New African Financial Architecture for Development (NAFAD), a continental initiative championed by President Dr Sidi Ould Tah and endorsed by African leaders earlier this year.
On the macroeconomic front, the report finds inflation moderating significantly across the region — falling from 26.1 percent in 2024 to 12.3 percent in 2025, with a further decline anticipated to 8.4 percent in 2026.
The report identifies significant underutilized financing sources across the region — from diaspora remittances and institutional investors to capital markets and natural resource wealth — though their potential varies widely by country.
Remittances play an outsized role in Lesotho and Zimbabwe, while Namibia and South Africa benefit from deeper capital markets and substantial pension assets, pointing to untapped scope for greater institutional investor participation.
To close the financing gap, the report recommends an integrated policy agenda: strengthening fiscal capacity and public financial management; curbing resource leakages and illicit financial flows; de-risking investment through targeted instruments and expanded blended finance; and mobilizing institutional capital — including pension funds, insurance companies, and sovereign funds — through public-private partnerships. It also calls for leveraging digital technologies to formalize economic activity, broaden the tax base, and reinforce the fiscal social contract.
The report argues that Southern Africa must move beyond bank-centric financial models to build deeper, more integrated capital markets capable of channelling long-term assets from pension and insurance funds.
Alongside the regional outlook, the Bank has unveiled its South Africa Country Focus Report (CFR) 2026, which applies the development financing theme at country level and shows that even Africa’s most developed capital market faces a significant financing challenge.
South Africa’s GDP growth rose to 1.1 percent in 2025 from 0.5 percent in 2024, supported by agriculture and stronger finance, real estate, and trade activity. Growth is projected at 1.2 percent in 2026 and 1.6 percent in 2027, aided by improved energy supply and Operation Vulindlela reforms
The report notes that South Africa’s October 2025 exit from the Financial Action Task Force (FATF) grey list, after completing 22 anti-money laundering and counter-terrorism financing reforms, helped strengthen investor confidence and supported Moody’s Ratings’ May 2026 outlook upgrade from stable to positive. These developments also underscore that stronger governance and institutional credibility can lower capital costs.
