This week brought a mixed picture: economic activity showed signs of recovery, but unemployment rose to 33.6%, manufacturing and mining remained under pressure, and economists warned that stronger growth is still needed to shift the employment needle.
South Africa’s economic news therefore offered something unusual: a little hope, alongside plenty of evidence that the country’s biggest problems remain stubbornly difficult.
The headline number was unemployment.
Statistics South Africa’s latest Quarterly Labour Force Survey showed the official unemployment rate rising to 33.6% in the second quarter of 2026, from 32.7% in the first quarter. The number of unemployed people increased by 345,000 to about 8.5 million, while employment fell by 16,000.
For KPMG South Africa’s lead economist Frank Blackmore, the numbers tell a familiar story.
“We need to get higher economic growth to provide at least the necessary conditions for the economy to absorb those unemployed persons into the labour force,” Blackmore said.
That is the central problem.
South Africa is not simply struggling to recover jobs. It is struggling to generate enough economic growth to create them.
There was, however, a more encouraging signal during the week.
The PayInc Economic Index, which tracks payment flows across the economy, rose to 102.7 in July after declining in May and June. Activity was 0.9% higher than a year earlier.
Lower fuel prices helped provide some relief to households and businesses.
But the improvement comes with a warning label. Independent economist Elize Kruger said international oil-market volatility could still push fuel prices higher, while geopolitical uncertainty could continue to weigh on spending, investment and hiring.
“July’s lower fuel prices provided some welcome relief and coincided with an improvement in economic activity. However, continued volatility in international oil markets means that the outlook remains uncertain,” Kruger said.
Then there was manufacturing.
Production fell 1.7% year on year in June, following a revised 4.4% decline in May. Food and beverages were among the biggest drags, while manufacturers continued to contend with high input costs, logistics problems and other domestic constraints.
Investec economist Lara Hodes said the June figures were stronger than consensus expectations, but showed that the sector was still struggling to gain meaningful momentum.
“The reading, while stronger than consensus expectations of a 3.7% year on year decline, suggests that the sector is still struggling somewhat to gain meaningful momentum,” Hodes said.
On a quarter-on-quarter seasonally adjusted basis, manufacturing output declined by 1.5%, suggesting the sector could have detracted from economic growth during the second quarter.
The weakness was concentrated in three of the 10 manufacturing categories, with food and beverages making the largest negative contribution.
Manufacturers also continued to face elevated uncertainty and higher input costs, alongside domestic challenges including administered costs and logistics inefficiencies.
Confidence among manufacturers remained weak during the second quarter, with the Absa Manufacturing Survey recording a confidence reading of just 31.
Mining's own conundrum
Mining offered another version of the same problem.
The value of South Africa’s mineral sales rose sharply in June, increasing 27.2% year on year, helped particularly by a surge in gold sales.
But mining production fell 4%, with platinum group metals, coal and iron ore among the biggest drags.
The distinction matters.
Higher commodity prices can lift the value of what South Africa sells without necessarily meaning the country is producing more. The sector continues to face constraints including rail capacity, limiting its ability to take full advantage of favourable commodity prices.
It is another reminder that South Africa’s growth challenge is not simply about demand. It is also about the country’s ability to produce, move and export what it has.
Tourism offers a different kind of opportunity
There was also a reminder this week that growth does not have to come only from the traditional engines of the economy.
Tourism is increasingly being positioned as a broader economic platform rather than simply a source of visitors.
South Africa welcomed a record 10.5 million international tourists in 2025, while the sector is estimated to support about 1.8 million direct and indirect jobs and contribute close to 9% of GDP.
The opportunity now is to make more of that spending reach local businesses, entrepreneurs and communities, and to turn tourism into a more consistent, year-round source of economic activity.
In other words, the challenge is not simply to attract more people to South Africa, but to make each journey generate more value.
And then there is AI
Looming over the jobs debate is another structural shift.
As The National explored this week, artificial intelligence offers South African businesses the possibility of significant productivity gains, but also raises a difficult question: will those gains translate into investment and expansion, or simply allow companies to do more with fewer people?
For a country already struggling to create enough jobs, that distinction matters.
AI could make businesses more productive and competitive. But productivity alone does not solve unemployment.
The bigger prize is using productivity gains to create new businesses, new investment and new opportunities.
The picture at the end of the week
Taken together, this week’s numbers tell a more complicated story than either “South Africa is recovering” or “South Africa is in trouble”.
The economy is showing pockets of resilience while its underlying capacity to create jobs remains painfully weak.
Payments activity improved. Tourism is growing. Commodity prices are generating export value. Businesses are looking to technology to become more productive.
But manufacturing is struggling. Mining production remains constrained. And the unemployment rate has moved even further above 30%.
For businesses, that means the coming months will be about more than watching GDP.
They will be about whether investment turns into production, whether production turns into hiring, and whether the tentative improvement in economic activity can finally begin to reach the labour market.
Can South Africa turn opportunities into the investment, production and employment needed to make growth felt beyond the headline numbers?
That is the story to watch next week.
Ashley.Lechman@nationalmg.co.za
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