SA’s economy grew in the first quarter, which did not yet fully reflect the impact of the Middle East conflict, which started with a US-Israel attack on Iran on 28 February.

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South Africa’s economy grew by 0.5% in the first three months of 2026 compared to the previous quarter.

This was stronger than expected. Economists polled by Reuters forecast GDP growth of 0.3% quarter-on-quarter. The growth rate also picked up from 0.4% in the fourth quarter of 2025.

SA’s GDP in the first quarter was 1.9% larger than a year before, Statistics SA reported.

The stronger growth came despite the manufacturing industry shrinking by 0.8% over the quarter, as well as a concerning 1.1% decline in gross fixed capital formation (GFCF) with sharp falls in spending on machinery and other equipment, and residential buildings. GFCF represents the money spent on buying and building physical assets like equipment and infrastructure that are needed for the economy to produce more in future.

Economic growth in the first quarter was fuelled in part by the finance, real estate and business services industry, which expanded 0.9%, as well as the trade, catering and accommodation industry (0.7%). The mining sector (+0.7%) was supported by strong activity in platinum group metals and gold amid a strong price rally at the time. GDP growth was also boosted by strong exports, thanks in part to higher mining export values.

The fastest growth was in the agricultural sector, which grew by 3.9% in the first quarter.

Statistics SA says this was thanks to increased activity in field crops and horticulture products. The official GDP data for the sector has been notoriously volatile and much disputed over recent years.

In 2024, a study commissioned by Agri SA and the Agricultural Business Chamber of South Africa found miscalculations in the data, which is supplied by the Department of Agriculture, Land Reform and Rural Development to Statistics SA. Some of the data has since been restated.

Earlier this year, the Bureau for Food and Agricultural Policy (BFAP), which conducted the study, again flagged concerns about the latest data, in particular Statistics SA’s deflation methodologies (which must strip out price increases to reveal real output changes).

The latest GDP number will bolster optimism that South Africa can deliver stronger growth in 2026 than the 1.1% it saw last year, which was still the fastest pace since 2022. Over the past decade, average South African growth has failed to crack 1% due in large part to load shedding and a crisis in rail and other infrastructure.

Amid progress in these areas and expectations of interest rate cuts this year, growth was expected to accelerate in 2026. But that was before the Iran war, which triggered a fuel price shock. The cost of wholesale diesel in Gauteng rocketed from below R18 a litre before the conflict started, to above R31 in May, before retreating to around R27.92 in June.

Pricier fuel is causing inflation fears, which saw the South African Reserve Bank hike rates earlier this month. The bank also downgraded its expected GDP growth rate for the year to 1.2% from 1.4% earlier, due to the impact of the Iran war, while also flagging the recent severe flooding in the Eastern and Western Cape.

The first-quarter GDP number only includes the first month of the war, which has been raging since the end of February.