SA’s fading star

9 February 2026 — Why are large companies shutting down operations or leaving South Africa? What does the US government’s Project Vault mean for SA? How much financial trouble is the City of Johannesburg really in? What does John Steenhuisen’s decision not to run for DA leader mean for the party and for the GNU?

SA’s fading star

Corporates are finding it increasingly difficult to make a business case for South Africa.

Last week, the paper and packaging group Mpact announced it was planning to close its Springs Mill in Gauteng and had commenced retrenchment processes that would affect 377 people. The Springs paper mill is the only local producer of white-lined cartonboard, used for cereal boxes and similar packaging. However, it can no longer compete with imported products available at prices up to 20% below the mill’s cost of production.

Also last week, the Volkswagen Group Africa chair, Martina Biene, said that 2026 would be a “make or break” year for the company in South Africa. She explained that South Africa’s hostile policy environment was making it hard for Volkswagen South Africa (VWSA) to make a compelling case for investment in the context of fierce global competition. VWSA employs around 4,000 people in South Africa.

The Wall Street Journal (WSJ), widely read by international business audiences, addressed the same theme last week, writing that “the corporate exodus from what was supposed to be Africa’s breakout economy is accelerating, propelled by a toxic cocktail of corruption, lawlessness and poor infrastructure.”

The WSJ pointed out that Shell and British American Tobacco were downsizing their operations in South Africa, that empowerment legislation was a significant obstacle in the way of getting Starlink to South Africa, and that Rolex had closed its South African affiliate office in 2024. International banks like BNP Paribas and HSBC were also exiting or had left.

Soft measures like presidential investment conferences and the euphoria of the Government of National Unity (GNU) will not be enough to reverse this sentiment shift. That is going to take hard choices to make South Africa’s investment environment far more attractive than it is now.

Project Vault, without South Africa

Last week, the United States (US) government stepped up its efforts to reduce its dependence on external sources such as China for critical minerals and rare earths processing. It launched Project Vault, a public-private partnership aimed at creating a stockpile of strategic critical minerals with $12 billion of seed money from private and public sources.

High-priority targets include rare earth elements like neodymium, dysprosium and praseodymium, needed for high-strength magnets; battery materials, such as lithium, cobalt, nickel and manganese; semiconductor metals like gallium, germanium, indium and silicon; aerospace and military materials like titanium, tungsten, scandium, niobium, and beryllium; and energy transition metals like copper and uranium.

The Project Vault announcement follows the signing of cooperation agreements by the US administration with countries such as Australia, Japan, and Malaysia, among others, over the last 12 months. Companies that signed on with their intention to participate include General Motors, Google, Boeing, and Stellantis.

As part of Project Vault the US administration last week hosted a meeting, the inaugural Critical Minerals Ministerial, in which seven African countries participated: Angola, the DRC, Guinea, Kenya, Morocco, Sierra Leone, and Zambia. Notably, South Africa was absent. While no bilateral critical minerals frameworks or MOUs were signed with the African governments that attended, this is likely to be done later.

The Project Vault framework will divert some of Washington’s attention away from more traditional trade and investment agreements. Countries that recognise the opportunity will increase their own geostrategic importance and leverage in trade deal negotiations, while also benefitting commercially.

The opportunity requires countries to implement policies that spur critical minerals and rare earths exploration, mining and processing; to provide safe and reliable operating environments for investors; to offer reliable and affordable ports, power and railways; and to have strong legal frameworks in place around licensing, rights management and contract enforcement.

Joburg’s financial woes deepen

South Africa’s economic and financial capital — Johannesburg — is in deep financial trouble at multiple levels. Last week, a major IT system failure disabled billing and payments operations at the City of Johannesburg (COJ). Payments from 19 January onward are not reflecting on accounts, leaving residents and businesses with apparent zero balances despite years of payments. February bills are delayed indefinitely while in-person payments have been halted since the beginning of the month.

This coincides with an ongoing cash-flow crisis. The COJ’s revenue collection rate averages below 90%, far below the National Treasury benchmark of 95%. As of September 2025, the city’s debtors owed it R67 billion, with 87% of the debt being over 90 days old. The 2025/26 budget is R89.4 billion, with R8.7 billion for capital expenditure.

The cash flow pressures and funding shortages are visible in every aspect of service delivery. For example, residents of Melville, a Johannesburg suburb, have been without water for two weeks. It is not the first time nor are they the only ones. Communities in Kensington, Emmarentia, Meldene, Midrand and in many other areas are repeatedly experiencing prolonged water interruptions.

In November 2025, it emerged that the COJ had diverted R4 billion from the accounts of Johannesburg Water to its own accounts to cover its liquidity needs. Such actions leave Johannesburg’s water agency owing contractors hundreds of millions, stalling projects, abandoning informal settlement deliveries, and risking broader service collapses in a vicious non-payment cycle.

These governance problems are exacerbated by corruption allegations involving senior executives at key entities, as seen with the arrest two weeks ago of Themba Mathibe, CEO of the Johannesburg Development Agency (JDA).

Police raided his home, reportedly seizing a large amount of cash in sealed South African Reserve Bank bags, sparking suspicions of links to a cash-in-transit heist or other crimes. Money laundering charges were filed against Mr Mathibe in relation to procurement irregularities at the Johannesburg Social Housing Company (Joshco) of which Mr Mathibe was the acting head.

Nor does the city council appear focused on reducing costs or addressing waste. In January, it approved the creation of a new deputy mayor position at an annual cost of R1.28 million. In December 2025, it voted to write off R868 million in unauthorised, irregular and wasteful expenditure, while voting to recover just R7 million in irregular expenditure and R1 million in fruitless and wasteful expenditure.

Given Johannesburg’s central role in South Africa’s economy, sustained municipal instability is deeply negative for investment sentiment, property markets, and business confidence.

DA leadership race thrown wide open

The leader of the Democratic Alliance (DA), John Steenhuisen, announced last week that he would not be seeking re-election at the party congress to be held in April.

The move reportedly came about under pressure from within the party after Mr Steenhuisen faced criticism over his handling of the foot-and-mouth outbreak in his role as agriculture minister, his falling out with the environment minister, Dion George, and his handling of his personal finances. The DA is eager to avoid reputational vulnerabilities in the run-up to the local government elections and will want to ensure that the party leader is not distracted from campaigning.

Mr Steenhuisen will remain in office as agriculture minister and said he would dedicate his full attention to combating the outbreak of foot-and-mouth disease currently threatening the country’s sheep, beef and dairy industries, as reported in last week’s Risk Alert. His success in doing so could be decisive in whether President Cyril Ramaphosa keeps him in his ministerial position or not. According to CRA sources, Messrs Ramaphosa and Steenhuisen have a stable, cordial relationship, and this is unlikely to change on the back of the DA leadership announcement.

Mr Steenhuisen’s decision to step back from the party leader contest is unlikely to greatly affect the dynamics between the DA and other parties within the GNU. At present, the balance of forces in the DA's leadership prefers that the party remain in the GNU to maintain an elevated profile and to leverage its reputation for stability and performance heading into the local government elections.

The presumed frontrunner to succeed Mr Steenhuisen is the executive mayor of Cape Town, Geordin Hill-Lewis. Should he run and be elected, it is likely that he will retain his mayorship while also assuming the mantle of DA federal leader, much as Helen Zille, now the chairperson of the DA’s federal council, had done previously. Mr Hill-Lewis is seen as a successful and popular mayor. He would strengthen the DA’s prospects in the contest with a weakened African National Congress, its partner in government and main political rival.