In a fresh setback for the Cyril Ramaphosa administration, South Africa’s economy shrank for the first time in almost two years in the second quarter of 2026, official data showed on Tuesday.
While the Iran war depressed the African giant’s domestic demand, the mining and manufacturing sectors too performed poorly.
South Africa’s gross domestic product (GDP) contracted 0.2% on a seasonally adjusted quarter-on-quarter basis. As per the official data, the contraction was mainly driven by output falls in the mining (-3.0%), manufacturing (-1.8%), and trade (-1.9%) sectors.
“The situation in the Middle East is definitely reflected in these numbers. The question we don’t yet know is how long the downturn will persist, especially for manufacturing,” said Joe de Beer, head of economic statistics at Statistics South Africa.
De Beer also added that third-quarter data would determine whether 2026’s annual growth rate could beat economists’ current projections of 1.2% to 1.5%.
Around February, the African country’s Finance Ministry was targeting 1.6% growth for 2026.
However, the onset of the Iran war that month triggered a global energy shock, causing a significant disruption in the flow of commodities through the strategically vital Strait of Hormuz.
Domestic fuel prices, as a result, went up, a development that darkened South Africa’s overall GDP outlook.
“Higher fuel prices clearly hit demand in South Africa really hard,” Razia Khan, chief Africa economist at Standard Chartered, told Reuters.
Household spending, a key driver of the South African economy, remained in positive territory in the second quarter, though fixed investments fell again.
Talking about what the country should expect in the third quarter, North-West University Business School economist Prof. Raymond Parsons said, “The evidence points to an economy in which recovery has been interrupted and delayed, rather than definitively derailed.”
The geopolitical volatility has also left an inflationary impact on South Africa’s economy, which, in turn, has resulted in faltering demand and weak business confidence, with the official gauge measuring sentiment falling to a two-year low in the third quarter.