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Economic activity stumbled to a seven-month low in June, recording a second straight month of significant moderation as uncertainty around efforts to resolve the US-Iran war made households and businesses hold back on expenditure and investment plans. The PayInc economic index — which reflects the value of all electronic transactions cleared through the utility on a monthly basis — declined 0.9% to its lowest level since November after a revised monthly drop of 2% in May. It was, however, still up 2.5% compared with a year ago. While a peace framework was signed during the month between the US and Iran to end a conflict that has disrupted global oil supply and sent energy prices soaring, PayInc said there was still a great deal of uncertainty about whether it will hold. (Dorothy Kgosi) Though oil prices have eased to around $72 per barrel after peaking at around $126 in April — when local consumers first felt the impact at the fuel pumps — current daily recovery indications for importers showed that price reductions for petrol and diesel in August may be limited, the national payments utility said.“Together with weaker confidence, these pressures are likely to weigh on economic activity in the months ahead,” independent economist Elize Kruger said.In a separate mid-year economic and business outlook half-time presentation delivered this week, economist Raymond Parsons, a professor at the North West University Business School, reiterates that South Africa is a small open economy and a net oil importer and therefore global shocks “quickly affect fuel prices, inflation, business costs and household disposable income”.“The global outlook has weakened as geopolitical conflict, energy-price pressures and trade tensions weigh on confidence and growth. For South Africa, the main (transmission channels) are oil prices, the rand, imported inflation, export demand, capital flows and investor sentiment,” Parsons said.Drawing a distinction between business confidence, which is a short-term measure, and investor confidence, which is long term, Parsons noted that after rising to 47 in the first quarter of 2026, the RMB/BER business confidence index fell by eight points in the second, reflecting the headwinds and renewed pressure from the Middle East conflict, oil prices, fuel costs and altered interest-rate expectations.“This suggests that confidence remains sensitive to external shocks and domestic policy credibility,” Parsons said in the presentation.“Economic uncertainty will dominate the immediate economic outlook until the negative external shocks have fully dissipated and the geopolitical outlook has indeed stabilised.”Expectations at the start of the year of a continued accommodative monetary policy, which would ease financial pressure on household finances, have disappeared since the start of the war. The South African Reserve Bank raised its main policy rate by 25 basis points to 7% in May as inflation risks stemming from higher oil prices intensified.The PayInc report showed that despite the softer economic environment, payment activity remained resilient, with 186.8-million transactions processed during June, up 11.6% from a year earlier. The nominal value of electronic transactions increased from R1.369-trillion in May to R1.427-trillion.“The second quarter has demonstrated just how quickly confidence can shift in response to global and domestic developments. While electronic payments activity remains resilient, the broader economic picture suggests that growth is likely to remain subdued until inflationary pressures ease and confidence returns meaningfully,” Kruger said.
