Supported by the same factors that lifted the South African economy last year, economic activity increased in March 2026.
However, this does not signal an economy out of the woods, as escalating geopolitical tensions threaten forecasts.
This is according to the latest PayInc Economic Index, which measures the value of electronic transactions processed through PayInc, in addition to the PayInc Cash Index for Q4 2025, which tracks developments in the different aspects of the cash industry.
“The PayInc Economic Index increased by 0.9% on a monthly basis to reach an index level of 104.7 in March,” says Shergeran Naidoo, head of stakeholder engagements at PayInc. “At this level, the index is 4.6% above a year ago.”
The latest developments signal strong momentum for the first quarter of 2026.
“It is evident that the cumulative impact of the tailwinds supporting the economy since 2025 has lifted economic activity,” explains independent economist Elize Kruger. “These include moderating inflation, real wage increases, interest rate cuts and improved confidence levels.”
Other timeous economic indicators confirmed the momentum in the economy during March.
Naamsa reported that total vehicle sales increased by 17,3% year-over-year in March 2026, while new car sales advanced by 18,2%. The S&P Global South Africa Purchasing Managers’ Index (PMI) rose to 50.8 following February’s neutral level of 50.0, signalling the first upturn in business conditions in six months.
Though still depressed, the seasonally adjusted Absa Purchasing Managers’ Index (PMI) increased in March to 49.0 from 47.4 in February, reflecting a marginal improvement in business activity in the manufacturing sector.
However, Kruger cautions that although March’s strong economic performance is encouraging, it is the calm before the storm.
The Iran war has disrupted the economic scenario envisaged for South Africa and the world. In its latest World Economic Outlook report, the International Monetary Fund (IMF) has downwardly revised global economic growth by 0.2 percentage points to 3.1%, citing the negative impact of the war on inflation and growth.
For South Africa, the IMF has downgraded growth to only 1.0% in 2026, slicing off 0.4 percentage points, marginally below the Carpe Diem Research view.
“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,” says Kruger.
Consumers and businesses have already been hit at fuel stations – with more pain expected. Although the temporary fuel levy subsidy of R3/litre has softened the impact for South Africans in April, it is costing the fiscus R6-billion per month in forfeited tax income. Despite the relief, the monthly increases of R3.06/litre for petrol and R7.37/litre for diesel (0.05S) on 1 April were the highest single month increases ever recorded for South Africa.
“At least two more months of increases are likely, unless notable progress is made to end the conflict on a meaningful, sustainable basis,” says Kruger.
The daily under-recoveries vs our current pump prices signal that another fuel price shock is in the making for the adjustment on 6 May, particularly for diesel users.
The month-to-date average under-recoveries for the 95 ULP and 93 ULP petrol prices, as of 13 April, are R3.20/l and R2.82/l, respectively. On the diesel price, the impact remains far worse, with the month-to-date average under-recovery for 0.05S diesel at a notable R9.61/l.
In addition to these increases, driven by product price and rand exchange rate fluctuations, a slate levy will also likely be added to May’s adjustment.
South Africa’s fuel price determination involves the use of a slate account, which is a cumulative, self-adjusting financial record used by the government to manage the differences between the Basic Fuel Price (BFP) and the official, monthly-adjusted pump price.
“It will be impossible for companies to absorb the extent of these projected fuel price increases that will not only cause a spike in consumer inflation but also likely to trigger a widespread upward adjustment in prices across the economy,” says Kruger.
Evidence of this secondary impact has surfaced from companies involved in the transport sector.
Due to a sharp increase in jet fuel prices, some major South African airlines have introduced temporary surcharges in March. As these increases also apply to cargo operations, they directly impact all airfreight services within South Africa.
A local courier company has introduced a temporary airline fuel surcharge on all airfreight routes, and a ride-hailing service has also adjusted fares upwards.
Meanwhile, agricultural organisations have warned that the spikes in both diesel and fertiliser prices will soon filter through to food prices.
The volume of transactions cleared through PayInc spiked in March 2026 to 195,5-million, up 13,4% year-on-year. The most notable increases were in the PayShap and EFT credit payment streams.
The cash supply to banks, included in the PayInc Economic Index, also increased in March. The nominal value of electronic transactions increased to R1,475-trillion in March compared to R1,326-trillion in February 2026.
PayInc Cash Index declined in Q4 2025
The PayInc Cash Index, published quarterly and tracking developments in the cash industry, declined by 1,9% in Q4 2025 compared to Q3.
This is based on these findings:
- The supply indicator, reflecting the supply of cash to industry, including banks and non-banks, to facilitate cash availability at different access points, declined by 6,7% compared to Q3, and sagged to a level 15,7% below a year earlier. This follows strong demand in August and September.
- The cash inventory indicator, recording notes and coins in circulation in the economy, declined by 1,2% in Q4 and remained 2.8% below a year earlier. Notes and coins in circulation in the economy reached R183-billion at end-2025.
- After remaining flat in Q3, the cash demand indicator increased by 2,1% between Q4 and Q3 2025, remaining 2,8% above a year ago. The demand indicator reflects the notes and coins in the hands of individuals and non-bank cash players. At above year-ago levels, it signals constructive demand for cash in the economy.
With the South African Reserve Bank (SARB) estimating that 62% of South Africans still rely on cash for their daily transactions, cash remains an important payment method in South Africa, despite plans to reduce its dependency in favour of digital transactions.
“While the economy started the year on a reasonably optimistic footing, the Iran war is now impacting inflation and interest rate expectations and will likely derail South Africa’s fragile economic recovery,” says Kruger.
“Though it is still early days to quantify the impact, the longer the war prolongs, the worse the outcome will be for South Africa and the global economy at large.”