AFRISAM BUDGET BREAKFAST HIGHLIGHTS ECONOMIC UPSIDE FROM COMMODITY PRICE SURGE

The strong rally in commodities such as gold, platinum, rhodium and palladium is creating significant windfall opportunities for South Africa to support its economic turnaround.

Speaking at AfriSam’s annual Budget Breakfast event in Sandton in February, Econometrix Chief Economist Dr Azar Jammine said the exceptional surge in commodity prices could have an “absolutely enormous” impact on the South African economy.

This year marks the eighth consecutive year that AfriSam has hosted its Annual Budget Breakdown Breakfast, bringing together key stakeholders from across the construction sector. The value of the event is reflected in the steadily increasing number of attendees each year, highlighting its growing importance as a platform for industry insight and engagement.

Dr Jammine pointed to an estimated inflow of about R350 billion into the country from commodity sales, arriving just as the economy began showing signs of recovery toward the end of last year. This follows a prolonged period during which South Africa lagged behind global growth levels, resulting in a decline in living standards of between 6% and 7% over the past eight years.

He noted that the key opportunity now lies in government directing this windfall toward higher levels of fixed capital formation through targeted investment in infrastructure, thereby creating an environment in which business can thrive.

“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 argued.

Dr Jammine highlighted that the third quarter of 2025 saw a modest uptick in fixed investment of 1.1% - the first positive movement in two and a half years. The Medium-Term Budget Policy Statement released in November 2025 also indicated that the Government of National Unity was beginning to produce “some positive results,” particularly through its commitment to fiscal discipline.

Higher commodity inflows have also contributed to a stronger rand against the US dollar, helping to reduce inflation to around 3.5%. This supports government’s lower inflation target of 3% and has helped shift inflation expectations downward.

“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 said.

Improving economic prospects have also been recognised internationally, with ratings agency S&P Global upgrading South Africa’s credit rating for the first time in 16 years.

Turning to the construction sector - which is closely aligned with AfriSam’s core business as a leading construction materials supplier - Dr Jammine reminded the audience that the industry remains under severe pressure due to years of underinvestment in fixed capital.

“Construction, comprising both building and civil engineering, is still about 30% below where it was in 2010,” he said. “By contrast, the agricultural sector is about 70% higher than its 2010 level.”

Employment in construction has also declined, falling by around 5% compared with 2019 levels, making it one of the weakest performing sectors in the economy. Dr Jammine attributed much of the decline in gross fixed capital formation to the deterioration of state-owned enterprises.

“They have seen the decimation of the country’s infrastructure, much of which relates to the era of state capture,” he said. “There has been a rape of our resources to benefit a handful of people interfering with procurement processes and standing in the way of proper service delivery and infrastructure investment.”

This situation is closely linked to crime and corruption, he added, noting that these challenges must be decisively addressed.

While private sector investment “has not been stellar,” Dr Jammine acknowledged that it has at least continued to grow gradually over time.

Reflecting the weak state of the construction industry, the number of residential building plans approved remains subdued, at around 40 to 50% below its peak. However, he believes there are signs that this trend may be reaching a turning point.

“Non-residential building plans passed show an even weaker trend, down about 85% from the peak a decade ago,” he said. “Arguably there was an oversupply in the middle of the last decade, and the Covid-19 pandemic then dealt the sector a further blow.”

Despite these challenges, Dr Jammine noted that renewed investment in infrastructure and mining development would provide an important boost for the construction materials sector, creating opportunities for companies such as AfriSam that play a key role in supplying cement, aggregates and readymix concrete to major infrastructure and development projects.

AFRISAM BUDGET BREAKFAST HIGHLIGHTS ECONOMIC UPSIDE FROM COMMODITY PRICE SURGE