A major new report on South Africa’s urban economies has sounded the alarm on slowing job growth, rising population pressures, and uneven post-pandemic recovery across the country’s largest cities, calling for urgent and coordinated reform to ensure metros remain engines of economic growth.
The Cities Economic Outlook 2026, released on Tuesday under the Spatial Economic Activity Data – South Africa (SEAD-SA) partnership, provides one of the most comprehensive analyses to date of how the country’s eight metropolitan municipalities are evolving. The collaboration is led by National Treasury, the Human Sciences Research Council, the University of the Witwatersrand, and the University of the Free State, with support from the UK’s Foreign, Commonwealth & Development Office.
Titled Cities in flux: Pathways of stress, adjustment and renewal, the report draws on new data from the Spatial Tax Panel (STP), a unique dataset built from anonymised tax records, offering detailed insights into employment, earnings, and sectoral shifts across municipalities.
The findings paint a complex and, in some respects, concerning picture. While South Africa’s metros remain central to economic activity, home to roughly 40% of the population and absorbing half of national population growth over the past three decades, their economic momentum appears to be weakening.
According to the report, employment growth in metropolitan areas has faltered over the past decade, with only Cape Town and Tshwane managing to buck the trend. At the same time, higher-value sectors such as manufacturing have stagnated in several cities, with job creation increasingly concentrated in lower-productivity, non-tradable sectors and public services.
This structural shift raises concerns about the long-term competitiveness of urban economies, particularly as cities are expected to drive innovation, exports, and inclusive growth.
Population growth is adding further strain. The report notes that South Africa’s metros are expanding rapidly, with populations doubling roughly every 22 to 30 years. This surge is intensifying pressure on infrastructure, housing, and basic service delivery—areas where many municipalities are already struggling.
The economic shock of the COVID-19 pandemic has compounded these challenges. Metros bore the brunt of initial job losses during the pandemic and have been slower to recover compared to non-metropolitan areas. Youth have been particularly hard hit, with limited signs of employment recovery among younger workers.
The report also highlights emerging risks and opportunities linked to the global transition to greener economies. While the shift could unlock new industries and jobs, its impacts are expected to vary significantly across regions and sectors, potentially deepening existing inequalities if not carefully managed.
At the core of the report is the Spatial Tax Panel, a longitudinal dataset constructed from PAYE records, company tax returns, VAT submissions, and customs data. This data is processed through the National Treasury Secure Data Facility and released in aggregated form, enabling policymakers to better understand how economic activity is distributed geographically.
Director-General of the National Treasury, Duncan Pieterse, emphasised the importance of cities in shaping the country’s economic future.
“Our cities are the engines of national economic growth, inclusion and innovation. If our cities do not work, South Africa cannot grow,” he said, adding that improved access to spatial economic data would strengthen planning and policy decisions across all spheres of government.
Lead editor of the report, Justin Visagie of the University of the Witwatersrand, said the new dataset marks a turning point in understanding urban dynamics.
“Until recently, even basic questions about metro GDP, employment trends and industrial change were difficult to answer with confidence. The Spatial Tax Panel allows us to move beyond speculation and focus on the real dynamics shaping our cities,” he said.
Importantly, the report is not intended to rank cities, but rather to highlight their distinct development paths and inform more targeted policy responses. It also introduces new analysis on economic complexity, spatial inequality—particularly in Gauteng—deindustrialisation trends, and wage disparities across urban areas.
The findings culminate in a clear call for reform. The report warns that South Africa’s overall economic performance will remain constrained if metropolitan economies fail to lead in job creation, investment, and high-value production.
It urges stronger coordination between national government, municipalities, state-owned entities, and the private sector, with a focus on upgrading infrastructure, supporting industrial development, and addressing spatial inequality rooted in apartheid-era planning.
British High Commissioner to South Africa, Antony Phillipson, said the UK’s Foreign, Commonwealth & Development Office is committed to supporting data-driven policymaking.
“High-quality, spatially detailed data is critical for understanding how cities are developing and for boosting economic opportunity,” he said.
As South Africa marks over three decades of democracy, the report underscores a critical reality: the country’s future is inseparable from the success of its cities. Managing rapid urbanisation, improving service delivery, and fostering inclusive economic growth will be key to ensuring that metros remain not just centres of population growth, but drivers of national prosperity.
