SA's fight to stay competitive in a new economic frontier

Source: Supplied. Frank Blackmore, lead economist at KPMG.

Powerful and converging forces are reshaping the global economy, including rapid advances in artificial intelligence, a shifting geopolitical order, and persistent volatility in global trade.

For South Africa, a country balancing deep structural challenges with undeniable innovation potential, these forces present both risk and opportunity.

The 2025 KPMG Africa CEO Outlook underscores this tension vividly. African CEOs are doubling down on digital transformation, with AI singled out as the single most important driver of competitiveness over the next three years. Yet the same executives flag geopolitical instability, domestic infrastructure constraints, and supply-chain fragility as the dominant threats to their organisations.

This duality defines the emerging business landscape:

1. AI as a growth catalyst - but only if South Africa adapts decisively

AI is no longer theoretical. It is accelerating decision-making, reshaping productivity, and altering the competitive dynamics of every major industry, finance, retail, agriculture, mining, logistics, and professional services. Globally, AI-driven efficiencies are beginning to separate firms and economies into leaders and laggards.

In South Africa, the potential is substantial. If adoption is broad-based and supported by policy, AI could meaningfully lift productivity and create new sectors of economic activity.

But there is an uncomfortable truth: without urgent investment in digital skills, data infrastructure, and regulatory clarity, AI could exacerbate existing inequalities and leave large segments of the economy behind.

Countries that are winning in the AI race are those investing in foundational capabilities — reliable energy supply, cloud infrastructure, national digital-skills pipelines, and clear governance frameworks. South Africa’s ability to compete globally will depend on how quickly we close these gaps.

2. A world in flux: geopolitics, trade and the shifting investment map

The geopolitical landscape is becoming more fragmented. Trade blocs are tightening, global supply chains are being redesigned, and nations are competing fiercely for technological sovereignty. This environment raises the stakes for South Africa, whose open economy is sensitive to external shocks.

For local executives, this means a heightened need to diversify markets, harden supply chains, and build resilience into operational models. The rise of “friend-shoring” and regionalisation also presents openings. South Africa can position itself as a stable, well-regulated entry point into the continent, particularly in high-growth digital industries.

Yet this opportunity will only materialise if we maintain macroeconomic stability, demonstrate policy predictability and improve competitiveness across logistics, ports, and energy.

3. 2026 as a tipping point: the risk of standing still

The coming year will test whether South Africa can translate intention into execution.

Several tripwires will shape the country’s trajectory:


• Energy reliability: Load-shedding improvements must be sustained and deepened, otherwise productivity losses will offset any digital-economy gains.
• Skills development: Without accelerated and ethical AI-related upskilling, the workforce risks mismatches that undermine innovation.
• Policy execution: Investors are watching for delivery, especially on infrastructure, transport corridors, and public-sector reform.
• Capital attraction: The global investment environment is competitive, which means that clarity on technology regulation, data protection and fiscal direction will be essential.

If South Africa delivers progress on these fronts, 2026 could mark the beginning of an important pivot toward a more competitive, technology-enabled economy. If not, we risk falling further behind peers who are moving faster and with greater coherence.

4. Where business and policymakers must focus next

To fully participate in the emerging AI-driven global economy, South Africa will need co-ordinated action between the public and private sectors.

Priority areas include:


• A national digital-skills accelerator to prepare youth and mid-career workers for AI-augmented roles.
• Strengthening data governance and AI regulation to enhance trust, protect consumers, and attract global technology investment.
• Fast-tracking energy and transport reforms, ensuring the backbone of the economy is stable and efficient.
• Building an ethical, competitive AI ecosystem by supporting research institutions, startups, and private-sector innovation hubs.
• Ensuring inclusive adoption, so that the benefits of AI do not accrue only to large corporates or wealthy regions.
This moment demands pragmatism, speed, and collaboration.

The road ahead

South Africa has always possessed two powerful assets: resilience and ingenuity. As the global economy is reshaped by AI and geopolitical realignment, those qualities will be tested once again. The next year offers a narrow but meaningful window to reposition the economy - to attract investment, modernise industry, and empower a new generation of digital talent.

If we get it right, AI could become a levelling force, unlocking growth, efficiency, and competitiveness. If we hesitate, the gap between South Africa and faster-moving economies will widen.

The choice is ours. And the time is now.