Economic Update September 2026
- Dr Roelof Botha
- 5 days ago
- 3 min read
Updated: 10 minutes ago
The Downside
After a four-week reprieve from military strikes in the Middle East, the end of August witnessed another flare-up in hostilities between the US and Iran, leading to another spike in oil prices. Despite the remarkable strength of South Africa’s currency, this contributed to a further rise in domestic fuel prices in September, which is bound to stall the recent downward trend in the consumer price index (CPI).
On top of higher transport costs, trucks have been facing excessive delays in entering the Durban Gateway Terminal (formerly Pier 2), South Africa’s most important and busiest port for container cargo. Container ships are facing offshore waiting times of 8 to 12 days, and major international liners have begun altering schedules, which include bypassing certain regional port calls to manage delays.
Ironically, the crisis occurred shortly after International Container Terminal Services Incorporated (ICTSI), headquartered in Manila, Philippines, won a bid to jointly manage Pier 2 with Transnet, aimed at improving efficiency. However, bottlenecks escalated in mid-August 2026 after transitioning to the new NAVIS N4 terminal operating system. ICTSI has also not been cooperating with relevant industry bodies to provide data on container throughput. The Southern African Association of Freight Forwarders (SAAFF) has escalated the crisis directly to the government, demanding an emergency recovery plan. The problems at Durban’s Pier 2 need to be resolved urgently; otherwise, the potential gains from the partial closure of the Strait of Hormuz may not be realised.
The Upside
Welcome, drop in consumer inflation
The decline in the July reading for the consumer price index (CPI) from 5% to 4.3% is exceptionally good news for holders of mortgage bonds and other forms of credit, as it may have spelled the end of the renewed rate-hiking cycle by the Reserve Bank that began in May.
Fortunately, the Monetary Policy Committee (MPC) held the repo rate and, as a result, the prime rate steady at its July meeting. Hopefully, the next meeting, scheduled for the end of September, will not be overly influenced by the most recent fuel price increases, with disappointing labour market data desperately calling for either another hold on interest rates or a resumption of the rate-cutting cycle.
The most important reason for optimism about the containment of inflationary pressures lies in food, the single largest component of household expenditure, particularly for poorer households. Annualised consumer food inflation stood at merely 0.6% in July – the lowest level since 2010, with grain-related products and certain fruits, nuts and vegetables actually moving into deflation.
Two other items in the CPI basket also contributed to the welcome decline in consumer inflation in July: electricity and fuel. Although the latter remains elevated, its year-on-year increase has narrowed considerably from 34.3% to 20.6%. The annualised increase in the item for electricity and gas fell from 9.9% to 8.3%, with further declines possibly stemming from the imminent end of Eskom’s monopoly over electricity generation and a promised revamp of financial management at several municipalities. An end to hostilities in the Middle East and Russia/Ukraine will almost certainly cause a sharp drop in fuel prices and lower global inflation.
Buoyant retail trade sales
The seasonally adjusted value of retail trade sales continues to reflect an economy that is growing, albeit not yet at the rates experienced before the state capture era. The predictable recovery in 2021 from the damaging effects of the COVID-19 pandemic was halted in its tracks by the strange decision of the monetary policy authorities to raise the country’s benchmark lending rate to its highest level in 15 years – despite the total absence of demand inflation.
Fortunately, the spike in oil prices caused by Russia’s military invasion of Ukraine was eventually reversed, which facilitated lower inflation and prompted the Monetary Policy Committee (MPC) of the Reserve Bank to lower interest rates from 11.75% in September 2024 to 10.25% in November 2025. It stayed there until May 2026, when the oil price rose above $100 per barrel again, prompting the prime rate to rise to 10.5%.
Although the seasonally adjusted real value of retail trade sales slowed down marginally during the second quarter of 2026, this key indicator of the state of the economy remains in growth mode. The total value of retail trade sales is expected to be within touching distance of R1.6 trillion in 2026, about 20% of the country’s GDP.
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.
