Economic Update August 2026

The Downside

July started on a positive note, with Brent crude oil averaging around $75 per barrel during the first ten days of the month. As has become customary since hostilities flared up at the end of February, the temporary pause in military strikes in the Middle East did not last long, with oil prices rising to $87 per barrel on 23 July.

Despite some relief in the form of a lower petrol price, August has started on a sour note for owners of diesel vehicles, with another hefty price increase driven by temporary shortages related to Ukraine's repeated drone attacks on Russian oil refineries. 

During July, most of the country's public sector employees were shaken by revelations of governance failures at Africa's largest asset manager and investment institution, namely the Public Investment Corporation (PIC). In line with dysfunctionality and management failures that have characterised dozens of government agencies at national and municipal level, the CEO of the PIC has been suspended, and several board members resigned, including the chairperson, erstwhile Deputy Minister of Finance David Masondo.

Past judicial investigations have identified risks and oversight failures in unlisted transactions, which were pursued, inter alia, as a result of the PIC following a mandate that included ideological objectives. The members of the Government Employees Pension Fund, who tally 1,26 million people, have every right to demand that fundamental investment principles be applied to all of the PIC's operations and that its whole board be constituted by experts in this field, without any political agenda or interference. After all, their hard-earned pensions are at stake.

The Upside

Tourists return in droves.

South Africa's tourism industry has shown scant regard for the global tourism hiccup caused by a combination of hostilities in the Middle East and soaring fuel prices. According to the latest data from UN Tourism, the conflict in the Middle East is likely to reduce international tourist arrivals in 2026 to below 3%, with almost zero growth having been recorded in March. Global travel and tourism have been hit hard by the spike in aviation fuel and air fares.

Tourists return in droves.

On top of more expensive travel, the aviation industry has also been hurt by uncertainty about air connectivity and reduced flight capacity. In South Africa, however, the arrivals of overseas visitors during the first six months of 2026 increased by 5.6% (year-on-year), a marked improvement on the 4.9% year-on-year growth recorded between 2024 and 2025.

The UK continues to occupy the top spot in terms of overseas arrivals, with the US hot on its heels, followed by Germany, the Netherlands, France and Australia. From a regional perspective, Europe continues to dominate, with North America in second position. An interesting observation from the 2026 data on international tourism compiled by Statistics SA is the dominance of arrivals from countries classified as free enterprise democracies. This group of countries accounts for 96% of overseas arrivals to South Africa.

S&P Global PMI remains above 50

During the second quarter of 2026, the average reading of the S&P Global South Africa Purchasing Managers' Index (PMI) for the private sector economy remained above the neutral level of 50, signalling a slightly greater improvement in business conditions compared to the past three years. This index is a composite gauge designed to provide a snapshot of operating conditions in the private sector economy. Readings above 50 signal an improvement in business conditions on the previous month and vice versa.

The quarterly average of the headline index has now been in growth territory (above the 50-mark) for two quarters in a row, despite headwinds from the war in the Middle East, which has led to higher fuel prices and inflation.

During the second quarter, employment growth remained relatively robust. Companies continued hiring both permanent and temporary staff to expand capacity, with employment having increased at the fastest rate in more than two years.

Purchasing activity improved in June after May's slight decline. Some respondents ordered additional inputs to hedge against anticipated price increases and supply disturbances, pushing input inventories higher for the third time in four months. 

Prime rate stays on hold.

Millions of indebted households would have been relieved by the Monetary Policy Committee's decision in July to keep its benchmark lending rate at 7%, translating into a steady prime overdraft rate of 10.5%. The monetary policy authorities followed the example of the US Federal Reserve and the Bank of England by adopting a wait-and-see approach, due to the anticipated temporary nature of higher global inflation. 

The war in the Middle East has caused oil prices to increase, leading to a spike in fuel prices and consumer inflation. Once the hostilities between the US and Iran have subsided, there is every chance that energy prices will decline sharply, especially due to plans by the United Arab Emirates and Venezuela to expand their crude oil production significantly. Inflation may therefore peak quite soon, which justifies the decision by many central banks not to overreact by raising interest rates when there is no excess demand.

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Dr. Botha

On balance, Dr Roelof Botha deliberately emphasises positive news. It often highlights the resilience of the South African economy and the immense scope for new business opportunities.