Fixing South Africa’s state-owned enterprises (SOEs) is critical to increasing business confidence and could unlock billions in investments in the economy.
While South Africa is making progress in improving the performance of its SOEs, reform momentum is uneven, with the country’s two most important parastatals, Eskom and Transnet, struggling to move at the pace required.
Abax Investments portfolio manager Omri Thomas explained at a recent Nedgroup event that there is a strong correlation between SOE performance and business confidence.
In other words, when the performances of SOEs improve, South Africa’s business confidence index tends to increase as well.
Business confidence has been a nagging problem in South Africa for years, with local companies experiencing severe uncertainty in the direction and security of the economy.
This has led corporates to hoard cash – around R1.8 trillion, according to the Reserve Bank’s estimates – rather than invest it in the local economy.
The Reserve Bank attributes this to prevailing uncertainty, South Africa’s continued low economic growth, and a lack of business confidence, which discourages corporations from using this stockpile to invest in the country.
Recently, this has started to improve. The latest RMB/BER Business Confidence Index for the fourth quarter of 2025 showed an uptick, from 39 to 44 points quarter-on-quarter.
While a positive trajectory, this still implies that less than half of the survey’s respondents are satisfied with South Africa’s prevailing business conditions.
RMB chief economist Isaah Mhlanga explained that, while this is a meaningful turn in the right direction, it is too early to celebrate.
“We need to see this tentative improvement being sustained for a couple of quarters,” he explained.
Mhlanga said continued structural reform progress remains pivotal so that improved demand can support sustained production growth, leading to faster capex spend down the line.
“While promising, but still fragile, it will need steady policy progress and consistent demand to take root and grow,” he said.
The high correlation between SOE performance and business confidence can be seen in the graph below, courtesy of Thomas.
Choppy progress
Positively, Thomas said South Africa is seeing progress in SOE reforms, which has led to a steady improvement in business and consumer confidence over the past year.
Thomas described the improvements as the “arteries of South Africa’s economy getting unclogged”, adding that this is necessary for the economy to grow.
He specifically highlighted Eskom and Transnet as having made meaningful gains, with the two SOEs both on a far more positive trajectory compared to a few years ago.
Eskom has largely secured South Africa’s electricity supply, with load-shedding seemingly a thing of the past.
Similarly, though slower, Transnet has also seen improvements, with freight volumes up and significant progress made in ensuring public-private partnerships in South Africa’s port and rail sectors.
However, Business Leadership South Africa’s (BLSA) latest update on its Reform Tracker shows that improvements are uneven across SOEs and industries.
The second BLSA Reform Tracker Quarterly Review revealed that while the freight logistics sector’s score improved from 67.6 to 73.9, the electricity sector’s actually worsened from 73.2 to 71.4.
BLSA attributed this to stalls and delays in Eskom’s unbundling process, a step considered critical to ensuring South Africa’s long–term electricity security.
In contrast, turnaround plans in the freight logistics sector are showing progress, with market reforms gaining traction and private sector participation initiatives advancing.
However, some reforms in this sector remain stalled, with BLSA specifically highlighting the National Rail Bill, which has yet to reach Cabinet.
This legislation is a crucial part of Transnet’s turnaround, with the Act designed to restructure the rail sector, enable private-sector participation, and reform the SOE by separating infrastructure from operations.
It also aims to shift freight from road to rail, enhance safety through the Railway Safety Regulator, and establish a competitive, efficient, and modernised rail network.
BLSA also pointed out that the corporatisation of the Transnet National Ports Authority remains stalled, and that the tariff framework for third-party rail access is unresolved.
“Deadlines keep slipping,” BLSA said. “Things moved in Q4, but the hard institutional work remains paramount.”
