Economic activity in South Africa increased in March, but the country is not out of the woods yet with risks stemming from geopolitical tension, according to a leading index published on Wednesday.
The Middle East war pitting the US and Israel against Iran has disrupted global oil supply and upended the economic scenario envisaged for South Africa and the world, said PayInc in its report.
PayInc is the country’s largest automated clearing house and national payments utility. Its economic index, which measures the value of electronic transactions processed through the utility, increased 0.9% month on month to 104.7 points in March. This was a 4.6% advance from its level a year ago.
The volume of transactions cleared through PayInc rose 13.4% year on year to 195.5-million in March, and the cash supply to banks included in the index was also up. The South African Reserve Bank (SARB) estimates that 62% of the population still relies on cash for their daily transactions.
The nominal value of electronic transactions increased to R1.475-trillion in March from R1.326-trillion the previous month.
“It is evident that the cumulative impact of the tailwinds supporting the economy since 2025 has lifted economic activity,” independent economist Elize Kruger said of the PayInc report, citing moderating inflation, real wage increases, interest rate cuts and improved confidence levels.
But she warned March’s strong performance was the calm before the storm as South Africa, along with other countries, contends with the fallout from the Middle East conflict.
In its latest world economic outlook report released on Tuesday, the International Monetary Fund (IMF) revised its global economic growth forecast for 2026 down 0.2 percentage points to 3.1% and that for South Africa down 0.4 percentage points to 1%, due to the negative effects of the war.
Ripple effects
“While the full extent of the impact of the war is still impossible to predict — given that no one knows how long the conflict will last — it has become increasingly clear that even if it is fairly short in duration, there will be ripple effects on global and local economic prospects in the months to come,” Kruger said.
South African consumers and businesses felt the first real shock from the war at fuel pumps at the start of April, where they had to fork out R3.06/l more for petrol despite the government trying to soften the blow by cutting a general fuel levy that is built into the retail price by R3. The wholesale price of diesel soared by R7.37/l.
Absorbing fuel price hikes
The country is bracing for another steep increase in May, and it is still unclear whether the government will extend the temporary reprieve on the general fuel levy beyond the initial month-long duration it announced.
Kruger warned it would be impossible for companies to absorb the extent of the projected fuel price increases for May, which would not only cause a spike in consumer inflation but also trigger a widespread upward adjustment in prices across the economy.
Indebted consumers can no longer count on the SARB providing some relief by cutting interest rates in 2026, as had been anticipated at the start of the year. The central bank kept its benchmark repo rate unchanged at 6.75% at its last policy meeting in late March, warning that the Middle East conflict had triggered upside risks to the inflation outlook.
The SARB, which is mandated to protect the value of the rand currency in the interest of balanced and sustainable economic growth by keeping prices stable, adopted a new consumer inflation target of 3% last year, abandoning the previous 3%-6% range.
Inflation slowed to 3% in February, aligning with the new target, but is expected to spike to as high as 4.5% in April as the steep jump in fuel prices filters through.
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