SA economy lifts in March but pain ahead amid fallout of Iran war

Economic activity increased in South Africa during the month of March, but this scenario is likely to change as geopolitical tensions set the whole world on edge.

The latest PayInc Economic Index reflects strong momentum for the first quarter of 2026 off the back of positive developments in 2025.

The Index increased by 0.9% on a monthly basis to reach an index level of 104.7 in March. At this level, it is 4.6% above a year ago.

However, although March’s strong economic performance is encouraging, it is the calm before the storm, cautions independent economist Elize Kruger.

The war in Iran has disrupted the economic scenario envisaged for South Africa and the world at large.

“It is evident that the cumulative impact of the tailwinds supporting the economy since 2025 has lifted economic activity”, Kruger says. 

These include moderating inflation, real wage increases, interest rate cuts and improved confidence levels.

Rising confidence levels have been reflected amongst others in the Naamsa new vehicle sales stats for the year so far and the Absa Purchasing Managers’ Index (PMI) increase in March.

RELATED: New car sales boom continues, with best March figures in almost 20 years

Talking to Motheo Khoaripe (in for Stephen Grootes), Kruger says we're at the point where the positive March figures in the PayInc Economic Index are going to be the last positive numbers they have to report on.

"I think we can start to see some pressure on economic activity as soon as April, given those significant spikes that we're seeing at the pump for both petrol and diesel. And we might be in for another month or two of higher fuel prices, depending of course on when there is a solution to the Middle East conflict."

As COVID defined "pre-" and "post-pandemic" eras, we'll probably see future analysis of 2026 referring to "pre-war" and "post-war", she says.

"We're starting to see the first impact now, the first pain; but there's more to come unfortunately."

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