The South African economy experienced a turbulent week with major data such as the monthly inflation rate showing signs of positivity, but despite a relatively low food inflation rate, the likelihood of another fuel price increase next month may dampen optimism.
Consumer Price Inflation (CPI) released by Statistics South Africa (StatsSA) on Wednesday saw a decrease for the first time in July since February, after having risen over the past four months due to rising fuel and global oil prices. Early forecasts from the Central Energy Fund (CEF) however show potential fuel price increases for September.
StatsSA said that annual consumer price inflation was 4.3% in July 2026, down from 5.0% in June 2026. “The CPI increased by 0.2% month-on-month in July 2026,” StatsSA said.
According to the South African Chamber of Commerce and Industry (SACCI) Business Confidence Index (BCI), Business confidence also remained steady in July - negative sentiment often results in a reluctance among firms to invest in new capacity and create more jobs.
Business confidence has been under pressure in 2026 due to rising fuel prices and inflation linked to the ongoing Middle East tensions, as well as structural problems in the economy.
SACCI stated that the BCI was 125.4 in July 2026.
“The BCI was still 8.7 index points higher than in July 2025. The most significant positive monthly impacts on the BCI in July were due to the number of new vehicle sales, merchandise export volumes, and lower energy prices.”
Data released by DebtBusters on Tuesday showed that top earners are under significant debt pressure in South Africa.
DebtBusters said a benchmark analysis of debt counselling applications for the second quarter has shown that those taking home more than R50,000 a month now need 103% of their income to make their debt repayments.
“The total debt-to-annual-net-income ratio for top earners is 307%. Much of this is driven by unsecured debt, which is 84% higher than it was in 2021, far outpacing the cumulative inflation of 29%," the report stated.
Benay Sager, executive head of DebtBusters, said that the longer-term lending picture suggests that credit risk is increasingly concentrated among fewer consumers.
“Over the past decade, the average unsecured loan size has increased, while the volume has decreased. This means larger unsecured loans are being granted to fewer consumers, concentrating credit risk within an ever-smaller group.”
DebtBusters added that while top earners are the standout group in terms of borrowing, many income bands have seen little or no improvement in their circumstances.
Consumer strain
The Debtbuster data highlighted that while some economic data provide positive for the economy, consumers are not yet out of the woods.
Frank Blackmore, lead economist at KPMG, warned that a worrying issue that remains is that core inflation still remains high at 4.2% which is well above the South African Reserve Bank's (Sarb) target of 3%.
Blackmore said, "Therefore I would expect that Monetary Policy Committee (MPC) would hold firm at the current repurchase rate for the foreseeable future."
This means that an interest rate cut from Sarb is less likely.
Dr Lerato Ntuli, Economist, Anchor Capital said that Sarb's MPC elected to leave the repo rate unchanged at 7.00% at its July meeting.
Ntuli said the moderation in headline inflation is encouraging, persistent underlying inflation and renewed pressure from energy prices are likely to keep the Sarb cautious.
"Brent crude has risen above US$90/bbl, compared with around US$70/bbl at the beginning of July, highlighting the sensitivity of the domestic inflation outlook to developments in global energy markets. While headline inflation has moderated, upside risks from oil prices, fuel costs, and the inflation outlook are likely to keep the Sarb cautious. We therefore expect the Sarb to maintain a relatively restrictive policy stance, with one additional 25-basis point rate increase likely during 2026," Ntuli said.
Fuel prices to bring more cost pressures
Adding to the cost-of-living crisis was early forecasts from the Central Energy Fund (CEF) that showed potential fuel price increases for September.
Data from the CEF shows that petrol prices could increase between 80 cents for 93 unleaded and 90 cents for 95 unleaded. The figures could potentially rise to the R1 to R1.10 range if the data from recent days persists.
The diesel price outlook is also concerning with the CEF data showing that prices could rise by R2.85 for 500ppm and R3.05 for 50ppm in September.
Illuminating paraffin appears to increase by R2.23.
Debt Rescue CEO Neil Roets said that rising diesel prices is particularly concerning because of its widespread impact across the economy.
"From a consumer debt perspective, a sharp diesel increase is particularly concerning because diesel is embedded in the cost of transporting food, operating public transport, supporting agriculture and delivering essential goods.
"Fuel price dynamics have subsequently turned less favourable, with Diesel 0.05% increasing by a further 6% in August. Looking ahead, the CEF's latest projections point to potential fuel price increases of around R2.90 a litre for diesel and 88 cents a litre for petrol in September, suggesting that fuel prices could place renewed upward pressure on headline inflation in the coming months," Ntuli said.
Ntuli said that the rand has provided some support, strengthening to around R16.20/US$1 from R16.40/US$1 at the end of July.
"The currency continues to benefit from elevated gold and platinum prices, which have improved SA’s terms of trade. Nevertheless, the recent recovery in Brent crude oil prices presents a renewed risk to the inflation outlook, particularly given SA’s reliance on imported fuel and the ongoing conflict in the Middle East," she added.
Rand rally
The South African rand showed stellar resilience this past week week as it reached R16.0860 against the US dollar on Friday.
The euro is traded 0.1% lower at R18.8111, and the British pound declined 0.2% and traded at R21.9508.
Nkosinathi Nsibande, portfolio manager at Abax Investments said that over the past month, the rand has staged one of its strongest runs since the outbreak of the Iran war, coming down from a peak of 16.98 to the 16.10–16.25 range, its strongest levels since early March.
"At the beginning of July, the rand had stabilised around 16.35–16.45 to the US dollar. The July monetary policy committee (MPC) meeting threw markets a curve ball by holding the repurchase rate at 7.00% in a split 4–2 decision, defying market participants who had fully priced a 25 basis point hike," Nsibande said.
ashley.lechman@nationalmg.co.za