Following six successive quarters of expansion, South Africa’s real gross domestic product (GDP) contracted by 0.2% in the second quarter of 2026.

^{29 September 2026}

The real gross value added (GVA) by the primary and secondary sectors declined, while the real output of the tertiary sector increased marginally.

The contraction in the real GVA by the primary sector resulted from lower real mining output, while activity in the agricultural sector increased slightly during the second quarter of 2026. Agricultural output was lifted by higher production of horticultural products and field crops, supported by favourable growing conditions, improved dam levels and good rainfall at the beginning of the quarter alongside strong residual soil moisture following heavy rains in the previous season. By contrast, animal production declined as outbreaks of foot-and-mouth disease persisted. Mining output contracted as production volumes decreased in 7 of the 12 mineral groups, with platinum group metals, manganese ore, gold and iron ore declining the most, while coal, nickel and copper production increased.

Real economic activity in the secondary sector contracted for a fourth consecutive quarter in the second quarter of 2026, driven by a further broad-based decline in manufacturing output as durable and non-durable goods production decreased. By contrast, the real GVA by the electricity, gas and water sector increased further in the second quarter, driven by higher electricity and water consumption. The real output of the construction sector also expanded further as residential and non-residential building activity increased.

Although the increase in tertiary sector activity in the second quarter of 2026 was broad-based among the subsectors, the pace of increase slowed sharply due to the notable contraction in the real output of the commerce sector, where the decrease in wholesale and motor trade activity outweighed the increase in retail trade activity. The intensifying cost-of-living pressures due to higher fuel and transportation costs following the outbreak of the war in the Middle East likely weighed on commerce sector activity in the second quarter. By contrast, economic activity increased in all the other tertiary subsectors.

Real gross domestic expenditure increased by 0.9% in the second quarter of 2026, primarily due to increases in the final consumption expenditure by households and general government as well as an accumulation of real inventory holdings. By contrast, real gross fixed capital formation contracted slightly further during the second quarter. The change in real inventory holdings contributed the most to growth in real GDP at 0.6 percentage points in the second quarter of 2026, while real net exports deducted 1.1 percentage points from overall economic growth as import volumes increased much more than export volumes.

After remaining unchanged in the first quarter of 2026, real final consumption expenditure by households increased by 0.4% in the second quarter, in line with the improvement in their real disposable income. Real expenditure on durable and non-durable goods as well as on services increased, while spending on semi-durable goods declined.

Household debt increased at a slower pace in the second quarter of 2026 as quarterly growth in most categories of credit extended to households moderated, resulting in the ratio of household debt to nominal disposable income decreasing to 61.3% over this period. Households’ net wealth increased in the second quarter of 2026 as the market value of total assets increased more than that of total liabilities. The higher value of assets reflected increases across most asset categories, except for shares and accounts receivable. The FTSE/JSE All-Share Index (Alsi) decreased by 3.3% in the second quarter of 2026 amid uncertainty around the global interest rate outlook, domestic inflationary pressures and evolving developments in the Middle East. By contrast, the value of housing stock benefited from higher prices, as growth in nominal residential property prices continued to exceed consumer price inflation over this period.

Real gross fixed capital formation decreased slightly further in the second quarter of 2026 as the lower capital expenditure by public corporations and private business enterprises outweighed the increase in capital outlays by general government. However, the level of real gross fixed investment in the first half of 2026 was 0.8% higher than in the corresponding period of 2025.

Total household-surveyed employment decreased by 16 000 to 16.74 million in the second quarter of 2026 as job losses in the formal and household sectors outweighed gains in the informal sector. The decline in formal sector employment was mainly driven by job losses in the community, social and personal services, mining, manufacturing as well as electricity sectors, which were partly countered by employment gains in the transport, trade and construction sectors. On a year-on-year basis, the pace of decrease in total household-surveyed employment accelerated from -0.2% in the first quarter of 2026 to -0.4% in the second quarter.

South Africa’s total labour force increased to 25.2 million in the second quarter of 2026 due to a substantial increase of 345 000 in the number of officially unemployed persons, alongside the marginal decrease in the number of employed persons. As a result, the official unemployment rate increased further to 33.6%. The number of people outside of the labour force decreased by 208 000 in the second quarter of 2026, largely due to a significant decrease in discouraged job seekers.

Growth in formal non-agricultural nominal remuneration per worker accelerated in the first quarter of 2026 due to a marked increase in nominal remuneration growth per worker in the public sector, while private sector remuneration growth per worker slowed marginally. However, in real terms, year-on-year growth in remuneration per worker slowed from 1.4% in the fourth quarter of 2025 to 1.0% in the first quarter of 2026, reflecting the acceleration in consumer price inflation over this period.

Growth in labour productivity in the formal non-agricultural sector accelerated further in the first quarter of 2026, reflecting a larger year-on-year contraction in non-agricultural employment while year-on-year growth in non-agricultural output accelerated. However, the continued acceleration in labour productivity growth should be interpreted with caution, as it largely reflected weaker labour absorption rather than a broad-based strengthening in productive capacity. At the same time, growth in formal non-agricultural nominal unit labour cost (ULC) moderated slightly to 3.5% in the first quarter of 2026, while growth in economy-wide ULC accelerated marginally to 3.2% in the second quarter of the year.

The prolonged war in the Middle East has intensified global inflationary pressures. The war-related surge in fuel and fertiliser prices has filtered through to the domestic economy, adding upward pressure to producer and consumer prices during the first half of 2026. Producer price inflation for basic and other chemicals accelerated to 26.9% in June, largely reflecting the surge in fertiliser prices after the outbreak of the war. In line with the sharp increase in global energy prices, domestic consumer fuel price inflation accelerated to 34.3% in June – its highest rate since September 2022 – before moderating to 20.0% in August, reflecting the sharp increase in international crude oil and refined petroleum product prices. However, the stronger rand exchange rate partly mitigated the pass-through of higher international crude oil prices to the South African economy as durable and semi-durable goods price inflation remained muted. Consequently, headline consumer price inflation accelerated from 3.0% in February 2026 to 5.0% in June before slowing to 4.4% in August. Most measures of underlying inflation also quickened somewhat to above the revised 3.0% inflation target during the first half of 2026, driven mostly by higher services price inflation.

South Africa’s trade surplus narrowed substantially in the second quarter of 2026 as the value of merchandise imports increased much more than that of merchandise and net gold exports. The increase in the value of both imported and exported goods reflected higher prices and volumes over this period. The terms of trade deteriorated notably over the same period as the rand price of imported goods and services increased much more than that of exports, largely due to the sharp increase in the realised rand prices of crude oil and refined petroleum products.

The value of merchandise exports decreased marginally in the second quarter of 2026, driven by the lower value of agricultural exports which outweighed increases in the export value of manufactured and mining products. Agricultural exports were weighed down by lower exports of vegetable products to some neighbouring countries as higher transport costs weighed on volumes and, to a lesser extent, lower exports of animal or vegetable fats and oils as well as raw hides and skins.

The value of net gold exports increased sharply in the second quarter of 2026 as the physical quantity of net gold exports rose significantly and outweighed the lower average realised rand price thereof. Despite continued gold purchases by central banks, the lower gold price reflected a stronger United States (US) dollar, a temporary easing in geopolitical tensions and expectations that US interest rates would remain elevated for longer, among other factors. However, the average monthly US dollar price of gold increased again from US$4 070 per fine ounce in July 2026 to US$4 424 per fine ounce in August as prospects for a quick resolution to the war in the Middle East faded.

Following declines in the preceding two quarters, the value of merchandise imports increased significantly in the second quarter of 2026 as the import values of mining, manufactured and agricultural products increased. The value of mining imports increased sharply, largely due to a notable increase in the value of mineral imports, driven by the significantly higher import value of especially refined petroleum products and, to a lesser extent, crude oil. The strong increase in the value of imported refined petroleum products reflected higher values of diesel, petrol and aviation kerosene imports amid the sharp increase in global fuel prices given heightened war-related supply concerns. The increases in the value of imported manufactured and agricultural products were more moderate and fairly broad-based across the subcategories.

The deficit on the services, income and current transfer account increased notably, driven largely by a significant widening in the deficit on the income account as gross dividend receipts decreased sharply and interest payments increased. Together with the marked narrowing in the trade surplus, this resulted in the balance on the current account of the balance of payments switching from a surplus of 2.3% of GDP in the first quarter of 2026 to a deficit of 2.6% of GDP in the second quarter.

The net flow of capital on South Africa’s financial account of the balance of payments switched to an inflow of R1.9 billion in the second quarter of 2026 from an outflow of R23.1 billion in the first quarter. On a net basis, direct investment, other investment and reserve assets recorded inflows, while portfolio investment and financial derivatives recorded outflows.

South Africa’s total external debt decreased from US$200.9 billion at the end of December 2025 to US$196.5 billion at the end of March 2026, as both rand- and foreign currency-denominated external debt decreased. However, expressed in rand terms, the country’s total external debt increased slightly as the rand depreciated by 2.9% against the US dollar over this period.

South Africa’s positive net international investment position increased to R1 939 billion at the end of March 2026 as the market value of foreign liabilities decreased more than that of foreign assets, mainly due to lower portfolio investment liabilities. Portfolio investment liabilities declined largely due to valuation effects following the 1.5% decrease in the Alsi in the first quarter of 2026 and higher domestic bond yields.

The nominal effective exchange rate (NEER) of the rand increased by 3.9% in the second quarter of 2026 as the currency was buoyed by improved global risk sentiment following the ceasefire agreement reached between the US and Iran as well as the intermittent progress made towards reopening the Strait of Hormuz. The rand was also supported by domestic factors, including an improved fiscal position and the decision of the South African Reserve Bank’s Monetary Policy Committee at the end of May 2026 to raise the policy rate by 25 basis points. Subsequently, risk appetite towards emerging markets deteriorated again amid renewed hostilities in the Middle East. However, despite some volatility, the NEER remained broadly unchanged from the end of June to 11 September.

The yield on 10-year rand-denominated South African government bonds declined from a recent high of 9.33% on 30 March 2026 to 8.32% on 26 June, as improved global risk sentiment linked to peace talks in the Middle East and improved US–China trade relations supported demand for domestic bonds. This was reinforced by renewed net purchases of domestic bonds by non-residents, an appreciation in the exchange value of the rand as well as an upgrade of South Africa’s long-term foreign- and local-currency credit ratings by Fitch Ratings against the backdrop of an improved fiscal position. Subsequently, the 10-year government bond yield increased to 8.91% on 11 September following the breakdown of the ceasefire agreement in the Middle East and the resultant increase in international crude oil prices as well as expectations that interest rates would remain higher for longer in the US and South Africa.

Year-on-year growth in the broadly defined money supply (M3) accelerated to April 2026, driven by a quickening in corporate deposit growth, before moderating somewhat to July. Household deposit growth remained subdued over this period, in part reflecting pressure on the financial position of households amid constrained disposable income growth and debt-servicing capacity.

Twelve-month growth in bank credit extended to the domestic private sector moderated slightly to 7.3% in July 2026 from a recent high of 8.8% in February, mimicking movements in corporate credit growth which, in turn, was driven largely by general loans to especially financial companies. Growth in credit extension to households was more subdued but nevertheless accelerated gradually during the first seven months of the year as the uptake of mortgage advances, general loans as well as instalment sale credit and leasing finance increased.

The preliminary non-financial public sector borrowing requirement decreased significantly by R40.6 billion year on year to R20.4 billion in the first three months of fiscal 2026/27 (April–June 2026) as the cash deficits of the consolidated general government as well as the public non-financial enterprises and corporations decreased. Within the consolidated general government, the improvement resulted mainly from extra-budgetary institutions switching from a cash deficit to a cash surplus, as cash receipts from operating activities grew faster than total expenditure, driven by higher intergovernmental transfers from national government.

National government’s preliminary cash book balance switched from a cash deficit of R26.0 billion in the first quarter of fiscal 2025/26 to a cash surplus of R1.9 billion in the corresponding period of fiscal 2026/27. Revenue increased more than expenditure, largely boosted by increased corporate income tax collections due to higher commodity prices. The stronger fiscal outcome reduced the net borrowing requirement and raised the primary surplus to R42.7 billion in April–June 2026 – more than double what was recorded in the corresponding period of the previous fiscal year. Consequently, national government’s total gross loan debt increased marginally to 78.2% of GDP as at 30 June 2026 compared with 78.1% a year earlier.