South Africa’s economy showed early signs of a modest quarterly recovery, despite a monthly decline in economic activity in September 2026, according to the latest PayInc Economic Index.
However, rising fuel prices driven by renewed tensions in the Middle East threaten to derail further growth in an already strained economy.
“The PayInc Economic Index declined by 0,4% month-on-month in September, following an upwardly revised increase of 1,2% in August,” says Shergeran Naidoo, head of stakeholder engagement at PayInc.
At 103.8, the Index was 1,8% higher than a year ago and 1,4% above its Q2 level.
“Despite the dip in September, the stronger economic activity over the quarter suggests South Africa could return to positive GDP growth in Q3,” says independent economist Elize Kruger.
However, heightened uncertainty and pressure on household finances continue to constrain the recovery.
Lower fuel prices in July and August provided some relief to the economy, supporting a modest improvement in activity. This was a short-lived reprieve as renewed conflict in the Middle East pushed fuel prices higher in September and to record levels in October.
Brent crude oil prices remain elevated above $105 per barrel as escalating tensions in the Middle East and renewed attacks on energy infrastructure in Ukraine heightened concerns over global fuel supplies. Attacks on ships in the Strait of Hormuz have added to uncertainty around transport security and costs.
“Fuel prices have become an increasingly important influence on South Africa’s economic performance. The inverse relationship between fuel price movements and the PayInc Economic Index has been particularly evident since March, with higher prices placing pressure on economic activity,” says Kruger. “With fuel prices reaching record levels in October, the risk of a further slowdown remains elevated.”
The average daily under-recoveries for both petrol and diesel prices month to date, suggest further increases are likely early November.
Attention will also turn to the Medium-Term Budget Policy Statement (MTBPS) this month, particularly whether fiscal conditions will allow Finance Minister Enoch Godongwana to consider relief through the fuel levy.
Other economic indicators in September presented a mixed picture. The S&P Global South Africa Purchasing Managers’ Index declined to 49.0 in September from 50.5 in August, signalling a deterioration in private sector business conditions.
Manufacturing, however, showed signs of improvement. The seasonally adjusted Absa PMI rose by 4.9 points to 50.7 in September, returning to expansionary territory after three consecutive months of contraction. New sales orders recovered strongly, while business activity regained much of the ground lost in August.
Vehicle sales also remained resilient. According to Naamsa, total domestic vehicle sales increased by 12,7% year-on-year to 57 761 units in September, marking the 24th consecutive month of annual growth.
Against this challenging economic backdrop, payment activity recorded a modest increase in September.
“The number of transactions cleared through PayInc rose to 197,3-million in September, compared with 196,3-million in August, although remaining below July’s record high of 201,5-million,” says Naidoo. “Transaction volumes were 9% higher than a year ago.”
The nominal value of electronic transactions increased to R1,447-trillion from R1,426-trillion in August. Most payment streams recorded modest increases in both volume and value, with Real Time Clearing the exception. Cash supplied to banks, measured in the PayInc Economic Index, also increased slightly during the month.
Despite the improvement in quarterly economic activity, full-year growth prospects remain subdued, with downside risks persisting. Higher fuel prices, geopolitical uncertainty and weaker business confidence continue to weigh on investment and economic activity. A further interest rate hike by the South African Reserve Bank’s Monetary Policy Committee has added to the financial pressures facing indebted consumers, as policymakers seek to contain inflation expectations.
“So far, 2026 has proven to be a challenging year, testing the resilience of South Africa’s economy and emerging markets more broadly,” Kruger concludes.