South Africa’s economy is showing tentative signs of a quarterly recovery, but the gains could be undone by a familiar threat: surging fuel prices amid renewed Middle East tensions. For investors and market-watchers, the latest PayInc Economic Index offers a mixed picture of an economy still struggling to build momentum.
The index recorded a 0.4% month-on-month decline in economic activity in September 2026, even after August’s growth was revised upwards to 1.2%, according to Shergeran Naidoo, Head of Stakeholder Engagement at PayInc. The index, which measures electronic transaction activity and wholesale cash demand at inflation-adjusted prices, stood at 103.8, up 1.8% year-on-year.
Independent economist Elize Kruger said the improvement over the third quarter suggested the country could return to positive GDP growth after a 0.2% contraction in the second quarter. “Despite the dip in September, the stronger economic activity over the quarter suggests South Africa could return to positive GDP growth in Q3,” Kruger said. For businesses and shareholders, a return to growth would mark a meaningful turn after a difficult stretch.
Other indicators, however, point to an uneven recovery. The S&P Global South Africa Purchasing Managers’ Index fell to 49.0 in September from 50.5 in August, signalling deteriorating private-sector business conditions. Manufacturing performed better, with the Absa Purchasing Managers’ Index rising to 50.7, while new vehicle sales increased 12.7% year-on-year to 57,761 units, a signal of demand holding up in that segment of the consumer market.
Kruger warned that higher fuel prices, uncertainty and weaker business confidence continued to weigh on economic activity, with further pressure on household finances threatening the recovery. “So far, 2026 has proven to be a challenging year, testing the resilience of South Africa’s economy and emerging markets more broadly,” she said. The fuel price risk is the one operators and investors are likely to watch most closely, since it feeds directly into costs, margins and consumer spending power.
Meanwhile, one striking feature of the data is that South Africans keep transacting. Nearly 200 million electronic payments were processed in September, with 197.3 million transactions cleared during the month, up 9% from a year earlier and slightly higher than the 196.3 million recorded in August. The total value of electronic transactions rose to R1.447 trillion from R1.426 trillion in August, although volumes remained below July’s record of 201.5 million.
Naidoo said transaction volumes were continuing to grow despite the challenging economic environment. The figures suggest that consumers are still transacting under pressure, though an increase in payment volumes does not necessarily mean households are spending more in real terms or have more disposable income. That distinction matters for retailers and their investors, since volume growth without real income growth offers a narrower path to profit.
By contrast, there is some evidence that price movements are shaping behaviour. Grocery retailer Boxer reported that shoppers were buying more as grocery prices eased, with selling prices falling 2.4% during its half-year period while sales volumes increased. The retailer’s figures show how consumers respond when prices come down, although its grocery sales data is not directly comparable with PayInc’s economy-wide payment figures. The findings also come with a warning that food inflation could return, potentially reversing some of the relief shoppers have experienced, a risk that would bear directly on retail volumes and household budgets alike.
Taken together, the data sketch an economy finding footing at the quarterly level while remaining exposed at the monthly one. A return to positive GDP growth in the third quarter would be welcome news for markets, but the fuel price threat, softer purchasing managers’ readings and the possibility of renewed food inflation mean the recovery is far from secure. Full coverage is available at https://iol.co.za/business/economy/2026-10-14-south-africas-economy-shows-signs-of-recovery-but-another-threat-is-looming/ and the coming months will test whether the third quarter’s improvement can hold.