The Cities Economic Outlook 2026 Report: A Critical Juncture for South Africa's Metros

South Africa’s eight metropolitan municipalities stand at a pivotal moment, according to the newly released Cities Economic Outlook 2026 report. Developed through a collaboration between the National Treasury’s Cities Support Programme, the Human Sciences Research Council, the University of the Witwatersrand, and the University of the Free State, with support from the UK Government, the comprehensive 155-page document paints a detailed picture of how these urban centres are faring amid economic pressures and post-pandemic recovery. Metros such as Johannesburg, Cape Town, eThekwini, Tshwane, Ekurhuleni, Nelson Mandela Bay, Buffalo City, and Mangaung collectively drive more than half of the nation’s GDP and employment, yet recent trends signal a worrying slowdown that could ripple through the entire economy if not addressed through targeted urban reforms.

The report draws on a decade of data from the Spatial Tax Panel to track employment trends, industrial restructuring, and population dynamics. It reveals that while metros have historically served as engines of growth, their momentum is faltering. Job creation has slowed, with some areas even recording declines in recent years, lagging behind national averages. This comes at a time when South Africa’s overall GDP growth is projected at a modest 1.6 percent for 2026, up slightly from 1.4 percent in 2025, according to National Treasury forecasts. The findings underscore a simple truth: the country’s broader economic prospects hinge on the performance of its cities.

Metro Performance Under the Microscope: Key Statistics and Trends

Over the past decade, South Africa’s metros have absorbed significant population growth, accounting for more than half of national population increases. However, this influx has not translated into proportional economic gains. Employment data shows metros contributing the lion’s share of formal jobs, yet growth rates have decelerated, particularly in manufacturing and construction sectors. The report highlights how industrial restructuring and technological shifts are reshaping the urban economy, with demand rising for green skills and reskilling opportunities.

Population pressures are intensifying. Metros house a growing share of the country’s urban dwellers, many in informal settlements, straining infrastructure and service delivery. Carbon emissions remain a challenge despite lower per-worker intensity compared to some global benchmarks, positioning metros as key players in decarbonisation efforts. The analysis compares South Africa’s urban metrics to international benchmarks across regions like East Asia and Latin America, revealing opportunities for improvement in density, productivity, and sustainability.

Stakeholders from government, academia, and the private sector emphasise that these trends demand immediate attention. Without stronger local leadership and coordinated alliances, the weakening of metro economies risks perpetuating national stagnation, inequality, and unemployment.

Infrastructure and Governance: The Core Challenges Facing Urban Centres

Decades of underinvestment and governance hurdles have left many metros struggling with basic service delivery. The report identifies crumbling water, electricity, sanitation, and waste infrastructure as major drags on productivity and investor confidence. Recent initiatives, including the Metro Trading Services reforms and the second phase of Operation Vulindlela, aim to restore reliability through institutional and financial incentives.

A new R54 billion incentive package announced in the 2026 State of the Nation Address targets upgrades in these critical areas, but implementation remains uneven across the eight metros. Governance reforms, such as enhanced oversight by the Auditor-General and preparations for a new Local Government White Paper, are underway. Yet the report cautions that fragmented coordination between national departments, state-owned entities, and local authorities continues to hinder progress.

Urban reform coalitions—bringing together public, private, and civil society actors—are proposed as a promising pathway. These alliances could tackle shared challenges like housing backlogs, transport inefficiencies, and skills mismatches more effectively than siloed approaches.

Photo by Julio Lopez on Unsplash

Economic Renewal Through Green Transitions and Skills Development

Amid global shifts toward sustainability, South Africa’s metros are poised to lead in green investments and workforce transformation. The report notes that urban areas concentrate industrial activity, technological change, and energy use, making them central to decarbonisation strategies. Demand for new occupational capabilities in renewable energy, sustainable construction, and environmental management is surging.

Case studies from metros like Cape Town and Johannesburg illustrate early successes in attracting green projects, though scaling these requires better access to finance and policy alignment. The findings stress that metros with proactive reskilling programmes are better positioned to capture high-value opportunities, reducing reliance on declining sectors.

Regional context adds depth: South Africa’s urbanisation rate exceeds many African peers, yet lags behind Asian counterparts in density and productivity. Learning from these benchmarks could accelerate progress toward more resilient, inclusive cities.

Stakeholder Perspectives: Voices from Policy, Academia, and Business

Experts involved in the report, including researchers from the Human Sciences Research Council and universities, highlight the human cost of stalled metro growth. Slower job creation disproportionately affects young people and marginalised communities, exacerbating inequality. Business leaders in logistics and manufacturing call for streamlined permitting and infrastructure reliability to unlock private investment.

Local government officials in metros like eThekwini and Tshwane point to successes in community partnerships but note persistent funding gaps. Civil society voices stress the need for equitable development that prioritises informal settlement upgrading alongside formal economic zones.

These diverse perspectives converge on one point: urban reform must be participatory and evidence-based to succeed. The report serves as a call to action for renewed commitment across all sectors.

Implications for National Growth and Inequality Reduction

If metro economies continue to lag, national growth will remain constrained. The report links metro performance directly to broader outcomes in employment, investment, and poverty reduction. With metros driving the majority of economic activity, their renewal could catalyse inclusive growth across secondary cities and rural hinterlands through improved connectivity and value chains.

Conversely, unchecked decline risks deepening spatial inequalities, with knock-on effects for social stability and fiscal sustainability. The analysis shows that targeted urban investments yield high multipliers, particularly when focused on infrastructure and human capital.

Future outlook scenarios in the report project that accelerated reforms could lift metro job growth above national averages within five years, supporting a more robust 2 percent+ GDP trajectory by 2028.

Photo by Davor Puljić on Unsplash

Actionable Insights and Policy Recommendations

The Cities Economic Outlook 2026 outlines practical steps for stakeholders. National government should prioritise urban investment in budgets and state-owned entity plans. Metros need to strengthen leadership capacity and foster public-private-civil society coalitions. International partners, including the UK Government, can support through technical assistance and knowledge exchange.

Businesses are encouraged to engage in skills partnerships and green innovation pilots. Residents and communities can advocate for transparent service delivery monitoring. Academic institutions, already central to the report’s research, can expand applied studies on urban economics.

These insights are actionable at multiple levels, from municipal budgeting to national policy frameworks.

Looking Ahead: Pathways to Sustainable Urban Futures

South Africa’s metros face stress but also hold immense potential for renewal. The report’s data-driven approach offers a roadmap away from decline toward vibrant, productive cities. By addressing governance, infrastructure, and skills gaps head-on, the country can transform urban challenges into engines of shared prosperity.

As the 2026 local government elections approach, the findings provide a timely benchmark for measuring progress. Continued collaboration between institutions like the National Treasury and research bodies will be essential to track implementation and refine strategies.

Ultimately, the success of South Africa’s economic outlook in 2026 and beyond depends on whether its metros can rise to the occasion with bold, coordinated urban reforms.