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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
September 16, 2026

Gross Operating Surplus: A View on Company Profits 2026Q2

South Africa’s business profitability showed surprising resilience in the second quarter of 2026, outpacing inflation despite a 0.2% contraction in economic activity, higher oil and import prices, trade tariffs, and ongoing diplomatic tensions. While overall profit growth slowed from the first quarter, several sectors, including transport and logistics, mining, electricity and utilities, personal services, and trade, recorded substantial gains, offering important clues about where the economy’s strongest opportunities may lie. This report examines the forces shaping Gross Operating Surplus across key industries, explains the mounting pressures on company performance, and considers whether easing geopolitical tensions, lower oil prices, and greater policy certainty could unlock stronger economic activity, employment, and investment in the months and years ahead.

Company profitability is a vital concern for both investors and the government. Investors evaluate potential returns, while the government considers how policy changes impact tax revenue and the overall economy.

A key method for assessing sector profitability is estimating the Gross Operating Surplus (GOS) at regular intervals, in this case, quarterly. In South Africa, GOS fluctuations generally align with GDP inflation trends, as shown in the accompanying graph. During the first and second quarters of 2026, company profits grew faster than inflation. However, in the second quarter of 2026, company profits increased less than in the first quarter, indicating greater pressure on profitability during this period due to higher international oil prices and higher import prices for goods needed by businesses.

While annual GOS growth remains relatively high for now, it is positive news, especially given the significant quarterly profit declines in seven of the ten key sectors in the first quarter of 2026.

On a more positive note, certain sectors experienced notable increases in gross profitability during the same period. Transport and logistics services profitability increased by 40.1%; Mining and Quarrying rose by 11.6%; the Electricity, Gas, and Water sectors increased by 13.9%; and Personal Services and Trade grew by 11.3% each.

This overall increase in profitability is quite surprising, given the 0.2% contraction in overall economic activity during the second quarter of 2026. The period was marked by increased operational challenges for companies, including continued diplomatic tensions between South Africa and the US, the imposition of trade tariffs on goods exported to the US market, and sharply increased international oil prices, which led to higher fuel prices in the South African economy, to mention a few. It is hoped these challenges will ease in the coming months, especially with the de-escalation of military conflict in the Middle East, the opening of the Strait of Hormuz, and notably lower international oil prices. Continued profitability of businesses in certain sectors, increased policy clarity and easing of trade & diplomatic tensions between South Africa and the US potentially could lead to greater economic activity, employment growth, and overall economic expansion in the third and fourth quarter of 2026 and beyond. Such improvements could also pave the way for much-needed investment growth in South Africa over the medium- to long-term, which the country desperately needs at this stage.

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