Aether Living Business Plan › Section 3 › Macroeconomic & Industry Context

3.1 South African Macroeconomic Environment

South Africa is Africa’s most industrialised economy, with a 2025
nominal GDP of approximately USD 405 billion and a population of
approximately 62 million people. Despite well-documented structural
challenges — including elevated unemployment, electricity supply
constraints, and constrained fiscal capacity — the country offers a
uniquely sophisticated capital market environment, a deep legal and
regulatory framework for property rights, and a well-developed banking
and pension-fund ecosystem. These attributes make South Africa the most
institutionally accessible African market for development finance
institutions and global infrastructure capital.

The Government of National Unity formed in mid-2024 has provided a
renewed reform momentum, with measurable progress in energy reform (the
Independent Power Producer programme), logistics reform (private sector
participation in Transnet), and financial-sector resilience. The 2025
Medium-Term Budget Policy Statement projects the fiscal deficit
narrowing to approximately 3.8% of GDP by 2026/27 and 2.7%–2.9% by
2028/29, supporting a gradually improving sovereign credit
narrative.

Figure 3.1

3.2 Interest Rate Environment

The South African Reserve Bank’s monetary policy stance has shifted
toward a measured easing cycle. Following peak prime lending rates of
11.75% in late 2023, three successive policy adjustments have brought
prime to 10.5% as of mid-2025, with consensus economists forecasting
prime in a range of 9.5%–10.0% during 2026. This trajectory is
materially supportive of residential demand, as a 125-basis-point
prime-rate decline reduces the monthly payment on a R1 million mortgage
by approximately R900–R1,100, equivalent to a 7–9% improvement in
household affordability.

For the Company’s financial structuring, the easing cycle materially
reduces the cost of working-capital and bridge financing. Combined with
the IFC senior debt facility (which is priced at concessional levels and
offers extended tenor relative to commercial banks), the blended cost of
debt is anticipated to be approximately 9.4% per annum across the
programme — a material competitive advantage relative to peers funded
entirely on commercial-bank terms.

3.3 Inflation & Construction Cost Environment

Headline CPI moderated from a peak of 7.0% in 2022 to 4.3%–4.5% in
2025, broadly within the SARB target range of 3–6%. Construction-cost
inflation has historically tracked headline CPI plus a 1.5–2.5
percentage point premium driven by import-dependent inputs (cement,
steel, glass, electrical and electronic components). The Company’s
procurement strategy mitigates this exposure through long-term framework
agreements with tier-one suppliers, vertical integration of solar and
battery procurement at platform scale, and a multi-precinct
concurrent-build strategy that supports volume-based price
negotiations.

3.4 Sovereign Credit & Country Risk

South Africa’s sovereign credit rating sits at BB- (Fitch) / Ba2
(Moody’s, stable outlook as of December 2025) / BB- (S&P), placing
it in the sub-investment grade category but with a stable outlook
reflecting incremental fiscal improvement. For development finance
institutions, the country’s well-established legal system, contract
enforceability, and dispute resolution infrastructure (which is anchored
by an independent judiciary) materially reduce non-financial country
risk relative to other sub-Saharan jurisdictions.

3.5 Property Sector Performance

The South African residential property price index has continued its
recovery trajectory. The Repeat Sales House Price Index increased by
4.9% in October 2025 compared with the prior year, with real
(inflation-adjusted) prices turning positive in May 2025 after an
extended decline period. Provincial divergence has widened, with the
Western Cape leading at 7.7% nominal growth and Gauteng/KZN gaining
momentum after a stagnant phase.

Figure 3.2

3.6 Currency & FX Considerations

The South African Rand has demonstrated long-run secular depreciation
against the US Dollar and Euro but has traded with relative stability in
2024–2025 supported by improved current-account dynamics and
constructive commodity export flows. For an institutional capital
provider deploying USD- or EUR-denominated capital, FX hedging is
available through deep liquid forward and option markets. The Company’s
revenue base is predominantly ZAR-denominated, however a significant
portion of capital expenditure (solar panels, battery storage,
technology platforms) is dollar-linked, requiring a deliberate FX
matching strategy described in Section 18.

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