South Africa's economic picture this past week appeared brighter as key economic indicators improved, however, surging international oil prices places the gains made at risk.
Trade conditions showed signs of recovery and the PayInc Economic Index rose 0.8% month on month in August.
While the local currency weakened slightly as it traded at R16.25 against the United States (US) dollar on Friday, Brent crude prices remained elevated at $103.02 a barrel.
This coming week all eyes will be on the inflation data released by Statistics South Africa (Stats SA) on Wednesday morning, 23 September, and on the South African Reserve Bank (Sarb) Governor, Lesetja Kganyago who will announce the central bank's latest decision on interest rates in the country, on the same day.
Trade conditions show a tentative recovery
South Africa’s trade conditions showed tentative signs of recovery after being battered by the surge in fuel prices earlier this year. Rising crude oil prices could put renewed pressure on businesses in the months ahead.
The South African Chamber of Commerce and Industry (SACCI) said its Trade Conditions Index improved from a low of 35 in June to 42 in August, signalling that trading conditions had stabilised somewhat after the disruption caused by the Middle East conflict and its impact on global energy prices.
The recovery remains fragile. SACCI said crude oil prices climbed from about $73 ((R1188) a barrel at the end of June to around $90 (R1464) by the end of August, an increase of about 23%.
The chamber warned that the increase could result in more cautious trading conditions, alter spending patterns and put pressure on businesses’ input costs and profitability.
“Trade conditions improved marginally in July and August 2026 and appears to have stabilized but remain in negative terrain,” SACCI said.
Economist Dr Simphiwe Madikizela, a senior lecturer at the University of South Africa’s School of Graduate Business and Leadership, said the improvement was encouraging but should not be mistaken for a complete recovery.
“I would describe it as an improvement in conditions rather than a full recovery, because the underlying trading environment remains relatively constrained,” Madikizela said.
He said the Middle East conflict had delivered a significant shock to the South African economy, particularly through higher oil prices, which raised costs throughout the supply chain.
PayInc index rises, but activity remains fragile
The country's PayInc Economic Index released on Tuesday last week showed that it had rose 0.8% month-on-month in August, following a revised 0.6% increase in July, which was an encouraging improvement, even though the outlook appears more constrained due to fuel-price pressures and weak investment.
Shergeran Naidoo, Head of Stakeholder Engagement at PayInc said the index reached 103.8 in August, 2.7% higher than a year earlier. July’s increase was revised from 0.3% to 0.6%, which the company attributed to better-than-expected consumer and producer inflation data.
“The improvement in July and August is encouraging and suggests the economy could return to growth in the third quarter, although probably at a moderate pace,” said Elize Kruger, an independent economist at PayInc.
“However, the economy is by no means out of the woods, with renewed fuel-price pressures and continued uncertainty posing downside risks.”
Sarb rate decision under pressure from oil prices
While South Africa's inflation picture improved significantly in recent months, rising oil prices and higher fuel costs are threatening to reverse some of that progress as the Sarb prepares for its next interest rate decision.
Dr Lerato Ntuli, economist at Anchor Capital, said headline inflation had moderated to 4.3% in July, but core inflation remained sticky at 4.2%.
“Oil prices have risen substantially above the MPC’s July baseline, from roughly $90 to $107 a barrel,” Ntuli said.
Ntuli said the pressure on the rand could also increase if the oil shock persists, potentially making imported goods more expensive.
“The scope for the Bank to look through a supply shock is much narrower than the Fed’s,” she said.
KPMG lead economist Frank Blackmore expects the Reserve Bank to raise the repo rate by 25 basis points, citing persistent inflationary pressures and the increase in oil prices.
“I think we’ll see action by Sarb next Wednesday that will result in an additional 25 basis point hike,” Blackmore said.
He warned that if geopolitical tensions and disruptions around the Strait of Hormuz continue, further increases could potentially follow before the end of the year.
For South African consumers, the immediate concern is whether the recent improvement in inflation can withstand the renewed pressure coming from fuel and transport costs.
With the Reserve Bank's inflation target remaining central to monetary policy, the September decision will be closely watched by households, businesses and financial markets.
ashley.lechman@nationalmg.co.za