South African banks are set to finance the 22,500 MW worth of private-sector energy projects currently in the pipeline, which amount to nearly R400 billion over the medium term.
S&P Global expects that lending will remain strong in 2026, with an increase of 8% to 9% projected, driven by corporate lending, particularly infrastructure investments like renewable energy projects.
Over the past few years, as South Africa’s energy sector has gradually been opened to private-sector players, local banks have emerged as quiet winners.
In S&P’s South African Banking Outlook for 2026, the firm expects local banks to continue benefitting from positive signals in the country’s economy.
In particular, S&P highlighted slightly higher projected GDP growth of around 1.5% in 2026 and 2027, driven by increasing electricity generation by the private sector, lower interest rates, and the introduction of the two-pot retirement system.
In this environment, banks are set to benefit immensely, with lending activity expected to remain strong.
S&P said this activity will be spurred by infrastructure investments, including in logistics and renewable projects.
It explained that local banks have prioritised lending to the renewable energy sector, which has seen corporate credit increase by 7.6% as of end-September 2025, compared with 5.2% in 2024 and 2.5% in 2023.
The firm expects this trend to continue in 2026, with banks set to play an increasingly important role in South Africa’s energy transition.
“Banks intend to finance projects related to the government-led Renewable Energy Independent Power Producer Procurement Program – which they have supported over the past few years – as well as private power projects,” S&P said.
“For example, the private sector has a pipeline of 22,500 MW in energy generation projects that amount to almost R400 billion over the medium term.”
However, reforms in the energy sector are not the only projects South African banks are set to benefit from, with S&P also highlighting lending opportunities from ongoing reforms in the railway, ports, and water sectors.
Households still feel the pain
While corporate credit extension is set to boom in 2026, S&P expects growth in household credit extension to be more modest.
The firm explained that household lending will be supported by lower interest rates, which have come down by 150 basis points in the Reserve Bank’s current cutting cycle.
This cycle started in September 2024 and has seen six 25-basis point cuts implemented, bringing the repo rate down to 6.75% and the prime lending rate to 10.25%.
Despite these cuts, S&P explained that lower interest rates take time to translate into increased household borrowing.
This is why the rise in household credit remained subdued at an estimated 2% to 3% in 2025, largely supported by mortgage lending.
While S&P expects household lending to continue growing in 2026, it noted that this growth will likely also be modest compared to corporate lending.
The firm explained that corporates have become increasingly attractive to South African banks when it comes to credit extension.
This is because households tend to be less reliable than corporates, leading to higher average credit losses.
S&P explained that households account for about 40% to 50% of banks’ loan books and have recently spurred credit losses in the system.
It said households’ average credit losses were between 150 basis points and 200 basis points, compared with below 50 basis points in the corporate banking portfolio.
In addition, amid increased lending to corporates, South African banks have implemented relatively conservative lending and underwriting standards and diversification to mitigate credit risk to some extent.
“We expect non-performing loans will decrease slightly toward 4.0% to 4.2% of total loans in 2026 from an estimated 4.5% in 2025,” the firm said.
