South Africa’s economy shrank by 0.2% in the second quarter of 2026, reversing the 0.4% growth of the first quarter, according to Statistics South Africa. In the same quarter the official unemployment rate rose to 33.6%. Business Leadership South Africa (BLSA) chief executive Busi Mavuso responded that “the situation should humble all of us”, as BusinessTech reported.
## Where output fell
Three industries drove the contraction, according to the SAnews summary of the GDP release. Trade, catering and accommodation fell by 1.9%, mining and quarrying by 3.0% and manufacturing by 1.8%. Seven of the ten manufacturing divisions recorded negative growth. In mining the biggest drags were platinum group metals, manganese ore, gold and iron ore.
Some industries grew: transport, storage and communication rose by 0.9%, general government services by 1.0%, personal services by 0.6% and finance, real estate and business services by 0.3%.
Household spending rose by 0.4%, helped by food and non-alcoholic beverages, recreation and health. Spending on housing, water, electricity, gas and other fuels, transport, communication, and clothing and footwear all pulled the other way, according to Stats SA.
## The labour market
The Quarterly Labour Force Survey shows the official unemployment rate up 0.9 of a percentage point from 32.7% in the first quarter. The number of unemployed people rose by 345,000 to 8.5 million, while employment fell by 16,000 to 16.7 million, according to SAnews’ report on the survey. The labour force grew by 329,000, or 1.3%, which is why joblessness rose even though the drop in employment was small.
Trade added 70,000 jobs, construction 39,000 and finance 11,000. Community and social services lost 57,000, mining 26,000, and agriculture and manufacturing 15,000 each. By province, Mpumalanga gained 41,000 jobs, the Eastern Cape 13,000 and the Free State 9,000, while the Western Cape lost 48,000, Gauteng 22,000 and North West 15,000.
Youth unemployment for people aged 15 to 34 climbed by 1.5 percentage points to 47.4%, with 264,000 more jobless young people and 40,000 fewer employed. The number of discouraged work-seekers fell by 227,000 to 3.7 million.
## Investment and state-owned companies
Mavuso said reforms in electricity and logistics are stabilising infrastructure rather than driving expansion. In her words, as quoted by BusinessTech, reliable electricity and logistics are growth enablers, but businesses need confidence in their reliability before they invest.
She pointed to gross fixed capital formation, the spending on assets such as factories, roads and equipment, which slipped to 13.6% of GDP, down 0.2 of a percentage point on the previous quarter. President Cyril Ramaphosa has set a target of 20% of GDP, which he has linked to the 3% annual growth needed to create jobs.
Private investment, Mavuso said, remained steady while investment by state-owned enterprises and government was weak. The state companies did post better results: Transnet reported a profit of R4.6 billion after a loss of R1.9 billion the year before, and Eskom a profit of R30 billion, according to BusinessTech.
## What economists made of it
The contraction ended six consecutive quarters of expansion, according to EWN. Trade shrank by 1.9% after six quarters of growth, and manufacturing recorded its third consecutive decline. Agriculture posted its seventh consecutive quarterly increase, and capital formation declined for a second straight quarter, with construction works and transport equipment the largest negative contributors.
On the spending side, IOL reported that net exports subtracted 1.1 percentage points from GDP as imports rose faster than exports. PSG senior economist Johann Els said that “mining and manufacturing were very weak, but consumers have held up reasonably well”. He kept his forecast for full-year growth at 1.4% to 1.6%, up from 1.1% in 2025. IOL also reported that the formal sector shed 41,000 jobs in the quarter, and that the unemployment rate is at a four-year high.
Economist Sifiso Skenjana told EWN the economy faces structural problems: construction has fallen to about 2% of the economy, and agriculture and mining together contribute only 11%, which limits how much labour-intensive sectors can add. He argued for recommitting to investment in the primary and secondary sectors.
For shops, the picture is thin demand from a labour market in which about one in three people who want work cannot find it, with household spending still edging up.
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