Part 6 of 7 · Operating environment
Infrastructure Reality Check, Incentives and Trade Access
Electricity is fixed but repricing. Logistics reform is directionally right and behind schedule. And in South Africa, site selection is risk management.
Section 9Electricity
Sources: Eskom FY2026 results statements and NERSA tariff determinations.
The turnaround is real: a full year without load shedding by May 2026, energy availability near 65%, R26.9 billion of diesel spend avoided over three years, and a credit-rating upgrade for Eskom. The costs are also real. NERSA has approved increases of 8.76% for direct customers from April 2026, 9.01% for municipal customers from July 2026, and 8.83% for 2027/28 — a cumulative ~18% over two years.
Analysts flag a potential capacity squeeze around 2029–2030 as old coal retires, unless transmission build — which badly missed its 2025/26 target — accelerates. The investor playbook: enjoy grid stability, model 9%-a-year power inflation, and treat behind-the-meter solar-plus-storage, now licence-free for most projects, as a standard hedge for any energy-intensive operation.
Section 9.1Logistics
Ports and rail remain the economy’s binding constraint, and the reform is mid-flight: rail access agreements signed with eleven private train operators (first slot allocations could add some 20 million tonnes from 2027/28), the Durban Pier 2 container terminal now under a 25-year private concession with R11 billion-plus committed and capacity rising from 2.0 to 2.8 million TEU, a transport economic regulator operating from April 2026, and a National Rail Bill drafted.
Against that, 60% of logistics reform deliverables were behind schedule in mid-2026, and rail volumes of roughly 168Mt remain far off the 250Mt target.
Section 9.2Water, telecoms and the municipal layer
Telecommunications are a strength: extensive fibre in the metros, competitive mobile networks, and a mature data-centre and cloud market serving the continent. Water is the emerging infrastructure risk, now the subject of its own national action plan and a new infrastructure agency — water-intensive investors should diligence local supply as carefully as power.
The consistent theme is the municipal layer. The metros and better-run towns (much of the Western Cape, parts of KZN and Gauteng) offer near-first-world services, while weaker municipalities impose real costs in water, roads and distribution electricity — municipal debt to Eskom passed R114 billion in 2026.
In South Africa, site selection is risk management.
Section 10Incentives and Special Economic Zones
The incentive architecture rewards manufacturing, jobs and location. The centrepiece for new industrial investment is the Special Economic Zone programme.
- 15% corporate income tax instead of 27% for qualifying companies operating in a designated SEZ under section 12R — subject to carrying on permitted trades, deriving at least 90% of income within the zone, and connected-party transaction limits (a criterion the 2026 Budget proposes softening to avoid penalising established zone businesses).
- An accelerated building allowance, the Employment Tax Incentive without age limits, and Customs Controlled Area benefits — VAT and duty relief on imports into the zone — layered on top.
- A national network anchoring specific value chains: Coega and East London (automotive, energy, agro-processing), Dube TradePort (air-linked logistics and pharma), Richards Bay (minerals and gas), Saldanha (oil, gas and marine — a true freeport), Tshwane Automotive SEZ (the OEM supplier park model), and others.
Beyond the zones, the dtic and partner agencies run a family of sector programmes — the Automotive Production Development Programme, agro-processing support, the Employment Tax Incentive for young workers nationally, film and television incentives, and the export-side instruments (EMIA and related schemes). The IDC provides concessionary industrial funding including the low-rate MCEP facilities.
Section 11Trade access and market position
| Corridor | Position in 2026 |
|---|---|
| Africa | The natural operational base for the continent — SADC free trade covers the southern region, the AfCFTA is progressively cutting tariffs continent-wide, and South African banks, retailers and logistics firms already operate the corridors an expanding business needs |
| Europe | The EU–SADC Economic Partnership Agreement gives duty-free or preferential access for most South African exports to the EU — the largest and most stable of the country’s trade relationships — with the UK replicated post-Brexit through SACUM-UK |
| United States | Turbulent. AGOA preferences restored but extended only to 31 December 2026; a baseline tariff of 12.5% applies to most non-exempt South African goods after the 2025–26 upheavals, with autos at 25% and steel and aluminium up to 50% under Section 232. US-facing business cases need scenario ranges, not point estimates, beyond 2026 |
| Asia and the Gulf | No comprehensive FTAs, but deep commodity relationships with China (the largest bilateral partner), growing agricultural protocols, and BRICS-linked institutional ties |
The strategic read: South Africa’s trade value proposition has tilted from ‘preferential exporter to the West’ toward ‘industrial and services platform for Africa with diversified external corridors’. Investors building for the African consumer and infrastructure story are aligned with policy, funding flows (including Afreximbank’s multi-billion-dollar South Africa country programmes) and the AfCFTA arc. Investors dependent on a single developed-market preference should stress-test accordingly.
