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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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A Watershed Moment: Global Ceasefire and Massive Oil Correction Offer Crucial Relief for the SA Economy

A sudden global shift has delivered much-needed relief for South Africa. Following a Middle East ceasefire, oil prices have dropped sharply and the Rand has strengthened—easing pressure on fuel costs and inflation. While earlier price spikes still weigh on the outlook, this combined correction offers a critical window for economic stability, improved consumer confidence, and renewed growth momentum.

The Great Fuel Buffer

South Africa finds itself balancing global energy shocks with decisive local action. As rising oil prices threaten to strain consumers and key industries, government intervention has softened the immediate impact—highlighting both the urgency of the moment and the need for smarter, more resilient fiscal tools to manage future volatility.

SARB opts for Strategic Resilience

The South African Reserve Bank has opted for a “hawkish hold,” maintaining the repo rate at 6.75% despite headline inflation hitting a milestone low of 3.0%. Governor Lesetja Kganyago emphasised that while the inflation target has been met, the MPC remains wary of a potential “energy tax” on the economy, driven by global oil prices surging above $100 per barrel. Consequently, the Bank has adopted a cautious, forward-looking stance, slightly lowering the 2026 GDP growth forecast to 1.1% to account for these external shocks and ensure long-term currency stability.

Navigating the Geopolitical Crosswinds

South Africa faces renewed inflation risks despite brief market relief, driven by rising fuel costs and import dependence. The SARB is likely to hold interest rates to protect price stability.

The Perfect Storm:

This morning, South Africans received what should have been a crowning achievement for the South African Reserve Bank (SARB). Data from Stats SA revealed that the Consumer Price Index (CPI) cooled to 3.0% in February, down from 3.5% in January. This lands the country perfectly on the SARB’s new, more ambitious inflation target.