ZANDILE MAKHOBA

The war in the Middle East may be more than 10,000km away, but for South Africa its economic consequences are already edging closer to home — most immediately at the petrol pumps and soon in the price of food.

Global conflicts that threaten energy supply tend to transmit rapidly through oil markets. For a country like ours, which imports the bulk of its fuel, this creates a direct and often immediate inflationary shock. Petrol prices rise first; the rest of the economy follows.

This second-round effect is where the impact becomes more deeply felt. As logistics costs rise, producers and retailers pass those increases through to consumers. The result is a steady erosion of purchasing power, most acutely experienced by lower-income households, where food and transport account for a larger share of monthly expenditure.

For these households, the adjustment is immediate and unavoidable. Consumption patterns shift, discretionary spending falls away, and financial resilience is tested. At a macroeconomic level, this behavioural change carries broader consequences.

South Africa entered this year with cautious optimism, supported by expectations of around 2% GDP growth. That outlook is now under pressure. If rising inflation suppresses consumption, growth is likely to be revised downwards. Business confidence, which had been fragile for many years and was seemingly on an upward trajectory, may weaken. This has implications for profitability and job creation.

The external shock also highlights a structural vulnerability in South Africa’s economy: its sensitivity to movements in its terms of trade. When the price of imports such as oil rises faster than export earnings, the balance deteriorates, often placing downward pressure on the rand.

Yet, in contrast to previous periods of global volatility, the rand has shown a degree of resilience. While volatile, the rand has not been as fragile as before, as we’ve seen improvements in the factors that typically weigh on it as political uncertainty has eased, and policy credibility has strengthened.

Even so, the margin for error remains narrow. A weaker currency would amplify imported inflation, intensifying the impact of higher oil prices and complicating the policy response.

Maintaining infrastructure investment momentum will be critical

For the South African Reserve Bank, this creates a delicate balancing act. Earlier expectations of interest rate cuts are likely to be deferred as policymakers assess the persistence of inflationary pressures. While the threshold for further rate hikes remains high, the scope for easing has clearly narrowed.

Against this more challenging backdrop, one area of relative optimism lies in investment, particularly in infrastructure. Unlike consumer spending, infrastructure projects are less sensitive to short-term shifts in household finances and can provide a stabilising counterweight to declining demand.

Encouragingly, much of this momentum is being driven by the private sector. Public-private partnerships are increasingly seen as more reliable mechanisms for delivery, offering a degree of continuity that has often been absent in purely state-led initiatives.

Infrastructure investment can help offset some of the slowdown in consumption, and while it is not a perfect substitute, it does provide meaningful support to growth when households are under pressure.

Maintaining this investment momentum will be critical if South Africa is to sustain the more positive economic trajectory it began the year with.

For households and investors, however, the immediate environment is defined less by opportunity than by uncertainty. Traditional economic relationships are proving less predictable, and even established safe havens are behaving in unexpected ways.

In this context, the most effective response is often the least dramatic. Households are advised to prioritise essential spending, build savings buffers where possible, and avoid overextending themselves financially.

For investors, discipline is more important than reaction. This is not the time for drastic changes. Volatility can lead to emotional decisions, but long-term strategies should remain intact.

Diversification remains a key principle, particularly in an environment where global shocks are both frequent and difficult to anticipate. Equally important is perspective: economic cycles, including periods of heightened uncertainty, are an enduring feature of the global system.

If there is a defining characteristic of the current moment, it is unpredictability. The transmission of global events into local economies is rarely linear, and outcomes are often shaped as much by sentiment as by fundamentals.

For South Africa, the immediate risks are clear: higher inflation, constrained growth, and increased pressure on consumers. Yet the country also enters this period with some buffers, a more stable political environment, credible monetary policy, and pockets of investment-led resilience.

For now, the conflict may be unfolding thousands of kilometres away. But its economic aftershocks are already travelling and, as history suggests, they rarely remain distant for long.