South Africa’s economy contracted by 0.2% in the second quarter of 2026, bringing the country’s longest run of quarterly growth in nearly a decade to an end.
The decline was worse than the 0.1% contraction economists had forecast, as weakness in mining, trade and manufacturing outweighed growth elsewhere in the economy.
Statistics South Africa also revised first-quarter economic growth slightly lower, from 0.5% to 0.4%.
Mining and manufacturing weigh on GDP
Mining was among the biggest areas of weakness between April and June, with output falling by 3%.
Lower production of platinum group metals, manganese ore, gold and iron ore contributed to the decline.
Trade contracted by 1.9%, with wholesale and motor trade among the main drags. Retail activity and accommodation remained relatively resilient.
Manufacturing declined by 1.8%, marking its fourth consecutive quarterly contraction.
Seven of the sector’s 10 divisions shrank during the quarter, with food and beverages, furniture and other manufacturing, and metals and machinery among the largest negative contributors.
The economic cost of war
The second-quarter figures were the first quarterly data to fully reflect the economic impact of the war between Israel and Iran, which began in late February.
Higher fuel prices, a knock-on effect of the conflict, and restricted shipping through the Strait of Hormuz fed through to domestic costs with a lag.
This compounded the effect of a Reserve Bank interest rate increase in May and cooling demand across the economy.
Seven industries still recorded growth
The overall contraction came despite seven industries expanding during the quarter.
Transport and communication grew by 0.9%, while construction recorded a second consecutive quarter of growth.
Agriculture extended its run of expansion to seven successive quarters.
Household consumption also provided some support, increasing by 0.4%.
Consumers increased spending on categories including food and non-alcoholic beverages, restaurants and hotels.
Investment remains under pressure
The expenditure side of the economy highlighted continued pressure on investment.
Gross fixed capital formation declined for a second consecutive quarter, with both private businesses and public corporations reducing investment.
Government investment increased.
Imports climbed by 4.9% during the quarter, substantially outpacing the 0.9% increase in exports and weighing on overall GDP growth.
Better electricity supply hasn’t translated into stronger growth
The latest GDP figures interrupt a sustained, although modest, period of expansion and highlight the difficulty South Africa faces in turning improvements in electricity supply and other structural reforms into stronger economic growth.
The investment figures are particularly significant.
With private businesses and public corporations both reducing capital formation during the quarter, the data suggest improved business conditions have yet to translate into the level of investment required to move the economy onto a higher growth path.
The second-quarter contraction therefore tells a broader story than a single negative GDP figure. While several industries continued to expand and household spending remained positive, weakness in major productive sectors and declining investment continue to constrain South Africa’s economic growth.
Read SA Business Integrator online
