South Africa’s economic activity ticked up in August, signalling some signs of resilience after a difficult second quarter, though renewed pressure from international oil prices, subdued investment and persistent uncertainty are still weighing on the outlook.
National payments utility PayInc’s economic index edged up 0.8% month on month to 103.8 points in August after an upwardly revised 0.6% (previously 0.3%) increase in July. It was 2.7% higher than a year earlier.
This follows a challenging second quarter, when GDP dipped 0.2%, the first contraction since the third quarter of 2024, with weaknesses concentrated in the trade, manufacturing, and mining sectors, according to Stats SA data last week.
“The improvement in July and August is encouraging and suggests the economy could return to growth in the third quarter, though probably at a moderate pace,” independent economist Elize Kruger said.
“However, the economy is by no means out of the woods, with renewed fuel price pressures and continued uncertainty posing downside risks. Uncertainty tends to make businesses more cautious about investment, expenditure and expanding their workforces.”
Despite the pressure from higher fuel costs, a Stats SA report on Wednesday nevertheless pointed to consumer demand — a key driver of economic growth — holding up fairly well at the start of the third quarter, rising 3.4% year on year in July after edging up just 1.1% in June.
On a month-on-month basis, sales were also up 2.5% in July after a 0.8% contraction in June.
“Retail activity continued to expand despite a challenging economic backdrop, marked by weak GDP growth, elevated unemployment and increased uncertainty stemming from the Iran conflict,” Standard Bank economist Shireen Darmalingam said.
Spending patterns remained uneven, though, with households cautious about discretionary purchases.
“Retail sales and consumer spending are expected to remain resilient but moderate through the remainder of this year. The main risks to the outlook stem from the impact of the Iran conflict on global energy prices, the possibility of higher fuel costs and lingering domestic structural constraints that continue to weigh on confidence and employment growth,“ Darmalingam said.
Renewed tensions in the Middle East have pushed international oil prices back to about $107 per barrel, raising the prospect of another big increase in domestic fuel prices in October, PayInc noted in its report.
The latest daily estimates from the Central Energy Fund suggest the price of 95-grade petrol will rise by R2.52/l in the economic hub of Gauteng, while the wholesale price of 0.005% sulphur grade diesel will increase by R2.62, after hikes of R1.34 and R3.15, respectively in September.
With inflation at 4.3%, far above the South African Reserve Bank’s 3% target, the monetary policy committee will weigh the risks of second-round effects from the oil price shock, versus the clear signs of an economy in distress, when it holds the fifth of six annual meetings to decide on interest rates next week.
“With economic growth expected to remain subdued and inflation elevated, the Reserve Bank’s monetary policy committee faces a difficult interest rate decision next week,” said Kruger.
Update: September 16 2026
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