After ending 2025 on a strong note, the PayInc Economic Index, which reflects the value of monthly electronic transactions cleared through PayInc, moderated in January 2026.
However, improving economic conditions and ongoing structural reforms continue to signal higher confidence levels in 2026, according to the latest report which also includes the latest PayInc Cash Index for Q3 2025.
“The PayInc Economic Index moderated to 103.5 in January, down 0.5% from December, but remained 3.4% higher than a year ago,” says Shergeran Naidoo, head of stakeholder engagements at PayInc.
The results represent a slight shift from December’s strong performance, during which both the nominal value and volume of transactions that cleared through PayInc reached all-time highs.
“For the 2025 year, the index was on average up by 3,1% compared to 1,5% in 2024, signalling economic activity remained resilient despite several challenges,” says independent economist Elize Kruger. “Given the timeous signals from the index, expectations that the economy grew by 1,3% in 2025, almost tripling the 0,5% in 2024, was well anticipated.”
2026 is likely to again be characterised by elevated volatility and uncertainty, as geopolitical developments, trade tensions and political realignments continue to unfold. This environment could indicate another year where safe-haven assets outperform, leading to elevated gold and commodity prices in South Africa.
Higher commodity prices will support the country’s terms of trade on the assumption that international oil prices return to more subdued levels, while also and lifting the rand exchange rate.
The IMF projects global growth to hold at 3,3% in 2026, unchanged from 2025, despite trade and tariff uncertainties.
“While the global environment is currently favourable for South Africa, the local economy will experience cyclical support from moderate inflation, real wage increases and interest rate cuts that will buoy household spending,” says Kruger.
Carpe Diem Research forecasts economic growth in 2026 at 1,6 %, supported by progress on structural reform initiatives and a moderate recovery in infrastructure spending.
Consumer inflation remains well under control in South Africa with headline inflation forecast at 3,4% in 2026, compared to 3,2% in 2025. Forecasts for lower average oil prices, a stronger rand exchange rate, and imported disinflation should support a moderate inflation outlook.
“Over the medium term, inflation expectations are expected to gradually anchor lower, paving the way for a sustainably subdued inflation environment in South Africa, supporting stability in the exchange rate and protecting the purchasing power of households,” explains Kruger.
Given the favourable inflation outlook, there is scope to lower interest rates further, with a maximum of 50bp rate cuts possible in 2026, on the assumption that the South African Reserve Bank gradually moves towards a less restrictive policy stance.
Surging precious metal prices have boosted export earnings and the trade surplus, with key export commodity prices as much as 50% higher than a year ago.
“This will have a positive impact on South Africa’s external accounts, leading to a favourable current account balance, in combination with strong capital flows that will support a reasonably stronger rand,” says Kruger.
On the assumption of commodity prices remaining at elevated levels, while sustained USD weakness prevails, the rand exchange rate is forecast to average R16.50/$ in 2026, compared to the R17.89/$ in 2025.
South Africa’s improving fiscal metrics, prudent macroeconomic policies and a stable political environment could boost the potential for sovereign credit ratings upgrades during 2026.
On the political front, the stability of the Government of National Unity and the lead up and outcomes of the local elections – set to take place between 2 November 2026 and 1 February 2027 – are important risk factors for the economic outlook in 2026.
Some diverging trends were evident among other timeous economic indicators in the past two months, partly explained by normal volatility in monthly indicators:
- The S&P Global South Africa Purchasing Managers’ Index declined to an index level of 47.7 in December, before recovering to 50.0 in January. The report indicated that firms observed more stable demand conditions and softer price pressures, while new business volumes were relatively balanced in January.
- The seasonally adjusted Absa Purchasing Managers’ Index (PMI) dropped steeply to 40.5 in December 2025, before recovering to 48.7 in January. While volatile from month to month, the business activity sub-index managed to edge back above the 50-level, suggesting that production growth could have reaccelerated in Q1. In general, the manufacturing sector’s performance remains under pressure, with demand generally sluggish, complicated by the rise in US trade tariffs and logistical challenges.
- Following a stellar year, Naamsa revealed growth moderated in January 2026, partly due to the high base of comparison. Total vehicle sales showed an improvement of 7.5% y/y in January 2026 compared to 19.2% in December 2025, while new car sales in January grew by 7,1% compared to 20,2% y/y in December.
After having reached an all-time high of 197-million in December, the number of transactions cleared through PayInc in January 2026 subsided to 177,8-million, still up by 13,8% on a year ago, according to Naidoo.
Volume declines were recorded across all payment streams, reflecting the softer economic activity, typical of January.
The supply of cash to banks, included in the PayInc Economic Index, also moderated in January. The nominal value of electronic transactions moderated to R1,25-trillion in January compared to R1.50 trillion in December 2025.
Positive demand for cash in Q3 2025
The quarterly PayInc Cash Index, which tracks developments in the different aspects of the cash industry, increased by 1,4% in Q3 2025, driven by a recovery in the supply of cash to the industry, among others, bank and non-bank players responsible for facilitating cash availability at different access points.
These access points include, among others, bank branches, bank ATMs, independent ATMs and point-of-sale cashback at retailers such as Checkers.
PayInc’s data reflects the supply of cash to banks via its Integrated Cash Management System, as well as a limited number of retailers. While the data is reliable, it does not give a full view of cash usage across the economy.
The index’s supply indicator increased by 4% compared to Q2 but remained at a 7,2% level below a year earlier. Measuring notes and coins in circulation in the economy, the cash inventory indicator declined by 0,4% in Q3 and remained 1,7% below a year earlier.
Interestingly, the cash demand indicator remained flat between Q3 and Q2 2025 but stayed 1,2% above a year ago. The demand indicator reflects notes and coins in the hands of individuals and non-bank cash players. Remaining above year-ago levels, the latest data signals positive demand for cash in the economy.
“The SARB recently launched the Cash Smart Strategy, which aims to modernise the cash value chain, to improve availability, accessibility and security of cash, while also lowering the inherent cost of cash,” says Kruger.
“This strategy forms part of the SARB’s Strategy 2030 and will run parallel with the strategy to move forward on the digitisation of transactions. All eyes will be on changes and developments in the cash space in 2026 and into the medium term.”
“Overall, the South African economy starts the year on a reasonably optimistic footing, with some tailwinds still playing out,” Kruger adds. “But ongoing progress on structural reforms, a sharp focus on governance and rooting out corruption are needed to ignite a much-needed improvement in confidence levels in the economy.”