As South Africa prepares for the 2026 Budget Speech on Wednesday, it is important that the fiscal framework moves decisively beyond policy intent and signals clear action and measurable progress in addressing the structural constraints that continue to suppress growth, investment and industrial competitiveness. Business expects tangible advances in implementing long-promised reforms, further improving logistics performance, continuing with the electricity reforms, implementing measures to address poor municipal service delivery performance, reducing crime and corruption, and removing regulatory bottlenecks that undermine confidence. Without firm execution in these areas, prospects for sustainable and inclusive growth will remain constrained.
Electricity reform must continue at speed. While progress has been made in stabilising generation capacity, the focus must now shift to accelerating transmission expansion, enabling greater private sector participation and ensuring a competitive, transparent energy market. Energy security remains foundational to industrial growth and investment retention.
Equally, local government reform can no longer be deferred. The deterioration of municipal governance, financial management, service delivery and the lack of maintenance of infrastructure is directly affecting business sustainability. The Budget should outline clear interventions to strengthen municipal capability, improve accountability and professionalise local administration. Decisive action to root out corruption and address organised crime, particularly infrastructure vandalism and addressing supply chain bottlenecks, is essential to restoring investor confidence.
Fiscal discipline remains critical. The Budget must demonstrate a credible commitment to spending within the country’s means, stabilising debt and protecting South Africa’s credit ratings. At the same time, government must prioritise growth-enabling expenditure, particularly infrastructure investment. Business requires far greater clarity on the R1 trillion infrastructure commitment over the medium term, including project pipelines, timelines, funding models and implementation capacity. Accelerating public-private partnerships, especially in rail, ports and energy infrastructure, is vital to unlocking private capital and improving economic efficiency. At a local government level, urgent interventions are also needed to arrest the deterioration of water, sanitation and electricity infrastructure, which directly impacts business continuity and investment decisions.
Against this backdrop, the future of South Africa’s automotive industry demands urgent attention. The domestic market has not grown to the extent envisaged under the Automotive Master Plan, while localisation levels have declined to between 30% and 40%, well below the 60% target. At the same time, rapid shifts in the global, national and domestic environment have placed local completely knocked down (CKD) vehicle manufacturing and component production, already constrained by limited economies of scale, under increasing pressure. This combination poses a material risk to investment retention, employment and the broader automotive ecosystem unless policy becomes significantly more agile and responsive.
From a policy perspective, it is both urgent and necessary to reverse the current bias that inadvertently incentivises semi-knocked down (SKD) assembly over CKD manufacturing. Automotive policy must place localisation, industrial depth, exports and meaningful job creation at its core. Key priorities should include closing loopholes that make SKD assembly attractive, while more strongly incentivising CKD manufacturing to ensure real value addition occurs locally. Localisation targets must be strengthened and actively incentivised.
In parallel, loopholes that allow importers to access Production Rebate Certificate incentives without sufficient local value addition must be addressed. These incentives should instead be channelled more directly towards manufacturers to support enhanced localisation, industrial capability building and export growth. Incentivising exports is essential if manufacturers are to achieve sustainable economies of scale and remain globally competitive. The Budget must also review outdated ad valorem taxes, and introduce targeted technology incentives to support plant modernisation and advanced manufacturing processes.
Speed and policy certainty are now imperative to prevent further deindustrialisation. Delays risk irreversible losses in productive capacity, specialised skills and supplier networks.
In respect of New Energy Vehicles, government policy must adopt a flexible, pragmatic and technology-agnostic approach rather than focusing too narrowly on a single pathway such as battery electric vehicles. This will enable manufacturers to leverage existing strengths while diversifying into a range of mobility technologies suited to both domestic and export markets.
Equally important is the need to incentivise incoming investors to localise component supply chains and support investment in emerging technologies such as battery assembly, fuel cells and electrolysers. Policy must be forward-looking, actively creating conditions for the assembly of hydrogen vehicles and related components. In Nelson Mandela Bay, home to a significant automotive manufacturing base, there is a unique opportunity to leverage this transition through the proposed R100 billion Hive Hydrogen green ammonia production plant earmarked for the metro. With the appropriate regulatory alignment, export agreements and infrastructure readiness, this project could anchor a new industrial value chain in the region.
Ultimately, this Budget must commit to decisive implementation that promotes enabling environment, reduces bureaucracy, improves infrastructure execution and accelerates structural reform. With credible execution and meaningful collaboration between government and the private sector, South Africa can unlock investment, drive sustainable job creation and enhance its global competitiveness.
Denise van Huyssteen is the Chief Executive Officer of the Nelson Mandela Bay Business Chamber.
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