Johannesburg city center. Drawing on more than a decade of detailed tax and employment data, the report reveals that metropolitan job growth has faltered, with only Cape Town and Tshwane showing consistent resilience.
Image: Supplied
South Africa’s metropolitan economies, which have long been seen as the engines of national growth, are facing mounting pressure as job creation slows, populations surge, and structural shifts reshape urban life, according to the newly released Cities Economic Outlook 2026.
The report—compiled through a collaboration between the National Treasury, the Human Sciences Research Council, and leading universities and released on Tuesday—paints a complex picture of cities in transition.
While metros remain central to economic activity, it warned that their ability to sustain growth and absorb a rapidly expanding population is increasingly under strain.
Drawing on more than a decade of detailed tax and employment data, the report reveals that metropolitan job growth has faltered, with only Cape Town and Tshwane showing consistent resilience.
At the same time, higher-value sectors such as manufacturing have stagnated, while employment has shifted toward less productive, non-tradable industries and public services.
Dr Duncan Pieterse, director-general of the National Treasury, underscored the stakes: “Our cities are the engines of national economic growth, inclusion and innovation. They drive economic activity in their regions. If our cities do not work, South Africa cannot grow.”
“By making spatialised tax data accessible, provinces and municipalities are better equipped with the insights needed for effective planning and a clearer view of how economic activity is distributed across the country.”
His remarks highlight a central tension in the report: cities are both the country’s greatest economic assets and its most pressing policy challenge.
Nearly 40% of South Africans now live in metropolitan areas, with these urban centres absorbing half of the country’s population growth over the past three decades. This rapid expansion has intensified pressure on infrastructure, housing, and service delivery.
The report also points to the uneven recovery from the COVID-19 pandemic.
While metros initially bore the brunt of job losses, they have lagged behind non-metro areas in regaining employment. Youth have been particularly hard hit, with little sign of improvement in job prospects since the pandemic.
For Professor Justin Visagie, lead editor of the report and Associate Professor at the Southern Centre for Inequality Studies at the University of the Witwatersrand and lead editor of the report, the findings represent a turning point in how policymakers understand urban economies.
“South Africa’s cities are central to national prosperity. Yet until recently, even basic questions about metro GDP, employment trends and industrial change were difficult to answer with confidence,” he said.
“The Spatial Tax Panel changes that. It provides a credible, granular and longitudinal evidence base that allows us to move beyond speculation and focus on the real dynamics shaping our cities.”
Rather than ranking cities, the report seeks to illuminate their distinct economic trajectories—revealing patterns of decline, resilience, and adaptation. It also introduces new insights into spatial inequality, economic complexity, and the mismatch between where people live and where jobs are located, particularly in Gauteng.
Another key theme is the green transition, which presents both risks and opportunities. While some regions may benefit from new industries and investment, others—especially those reliant on carbon-intensive sectors—face potential disruption.
The report ultimately calls for urgent urban reform, warning that national economic performance will remain constrained if metros cannot lead in job creation and investment. It advocates stronger coordination between government, state-owned entities, and the private sector, with a focus on infrastructure development, industrial upgrading, and spatial integration.
International partners are also playing a role in shaping this agenda.
Antony Phillipson, British High Commissioner to South Africa, emphasised the importance of data-driven policymaking.
“The UK is proud to support the SEAD-SA partnership in strengthening insights that underpin South Africa’s urban economic policy. High-quality, spatially detailed data is critical for understanding how cities are developing,” he said.
“Through our collaboration, we are working with national and local partners to boost economic opportunity and enhance the quality of life in metros across South Africa.”
As South Africa marks more than three decades of democracy, the report delivers a clear message: the future of the country’s economy will be determined in its cities. Managing urban growth—rather than resisting it—will be key to unlocking inclusive development.
BUSINESS REPORT