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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
March 10, 2026

South African Economic Performance – GDP, Economic growth and Inflation for 2025Q4

The South African economy grew by 0.4% in the fourth quarter of 2025, slightly below market expectations of 0.7%. This modest growth comes despite positive economic indicators, interest rate reductions, and improved confidence levels during this period. Remarkably, overall, electricity supply constraints did not impede performance in 2025.

Among the ten sectors, seven showed annual growth. Notably, the Agricultural sector increased by 19.9% during the last quarter of 2025, despite US tariffs on imports from South Africa, while the Manufacturing sector contracted by 0.6% during this period. The Finance and Wholesale & Retail sectors grew by 1.4% and 2.6%, respectively, during the fourth quarter of 2025, indicating that lower interest rates, coupled with lower inflation, were starting to work through the economy holistically.  

Overall, South Africa’s economic growth for 2025 is estimated at 1.1%, a notable increase from 0.5% revised growth for 2024, which remains inadequate to address the high unemployment crisis. However, with increased market optimism heading into 2026, even with trade tensions between South Africa and the US and ongoing conflict in the Middle East between the US and Iran, no load-shedding, a lower interest rate, and an inflation rate of 3.5% and a target of 3.0% by the SARB, there is potential for improved economic activity going forward in 2026.

Challenges persist for businesses, and it is crucial for the government to deliver policy clarity and concrete progress on previously announced structural reforms. These structural reforms, coupled with Government infrastructure investment in the February 2026 budget, might just be the spark the South African economy needs for continued growth in 2026. It should however be mentioned that the extension of the AGOA agreement for only 2026 and a possible expulsion of South Africa from this agreement will most likely still threaten South African businesses exporting to the U.S. Addressing these critical issues is essential to boost business confidence further for the year, which is necessary for driving significant economic growth in the coming months—a need that South Africa cannot overlook at this stage.

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International Trade and Trade Balance – August 2026

South Africa recorded a trade surplus of R20.4 billion in August 2026, as exports continued to outpace imports. Export growth has exceeded import growth over the first eight months of the year, reflecting subdued domestic demand among businesses and consumers. But with higher fuel prices and tighter monetary policy expected to weigh on spending, demand is likely to recover only gradually. Read the full report for a closer look at the trade figures and what they could mean for South Africa’s economy in the months ahead.

Private Sector Credit Extension (PSCE): August 2026

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Producer Price Inflation – Aug 2026

South Africa’s producer price inflation eased to 5.0% year-on-year in August 2026, but persistent fuel and energy shocks continue to place pressure on the economy and keep inflation well above the South African Reserve Bank’s new 2%–4% target range. Although the pace of price increases has slowed, rising costs in petroleum, chemicals, metals, machinery, and intermediate goods, alongside elevated mining costs, suggest that inflationary pressures are still filtering through to businesses and consumers. With consumer inflation at 4.4% and the Reserve Bank having raised interest rates by 25 basis points, this report examines what the latest PPI trends mean for South Africa’s inflation outlook, interest-rate decisions, and the cost pressures likely to shape the economy in the months ahead.

MACROECONOMIC & POLICY BRIEFING

When the South African Reserve Bank unexpectedly tightened monetary policy by 25 basis points to 7.25%, pushing the prime lending rate to 10.75%, it aimed to anchor inflation against imported oil shocks, but at what cost to an already bleeding real economy? With South Africa’s GDP contracting by 0.2%, unemployment climbing to 33.6%, and mining and manufacturing output in reverse, our economic challenge is not an overheated consumer base, but a severe supply-side squeeze. Raising the cost of capital cannot lower global crude prices; instead, it delivers a direct hit to strained household balance sheets and further stifles already anaemic Gross Fixed Capital Formation (GFCF). Dive into the full analysis to unpack why orthodox monetary tools miss the mark in an economy rationing out of necessity, what Governor Lesetja Kganyago’s latest guidance reveals about the interest rate path ahead, and how corporate leaders and investors must position their capital to navigate South Africa’s “higher-for-longer” reality.

Consumer Inflation – August 2026

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