More than just oil

16 March 2026 — What’s the impact of the war in the Middle East beyond just oil? What do you need to know about SA’s economic growth numbers? Who has the power to change the VAT rate? What lies behind the latest spat between the US and SA? What did the president of Brazil, Lula da Silva, tell President Cyril Ramaphosa during his visit? Will “sending in the army” to fight crime work this time around?

More than just oil

The knock-on effects of the war between the United States (US), Israel and Iran on global supply chains are receiving less attention than the energy price shock itself. For instance, much of the world’s sulphur moves through the Strait of Hormuz. Its main use is to make sulphuric acid, the world’s highest-volume chemical.  

In this and other forms, sulphur, a byproduct of Gulf oil refining and gas processing, is a key ingredient in processes as diverse as rubber vulcanisation, detergent and pigment manufacturing, petroleum refining, metal extraction from ore, paper manufacturing, asphalt production, pharmaceuticals, water treatment, and explosives manufacturing.

This means that a sustained interruption of maritime traffic through the Strait of Hormuz will affect more than just energy markets — it will lead to bottlenecks and cost inflation in many other industrial sectors.

Sulphur is also an important feedstock for fertiliser production, with about 70% of global sulphuric acid going to fertilisers. Fertiliser manufacturers are already reporting supply stress. Food prices globally will feel this within weeks if disruption persists. South Africa, as a significant agricultural producer but a net importer of fertilisers, faces higher input costs while potentially benefitting from firmer export prices.

On the energy side, refined products such as petrol, diesel, and aviation fuel arrive primarily from the United Arab Emirates, Oman and Kuwait, all of which are directly affected. South Africa keeps most of its strategic fuel reserves in crude oil form but has only two operational refineries.

Current under-recoveries point to an April fuel price increase of R2 to R4 per litre, on top of levy increases taking effect on 1 April. In a worst case, inland petrol approaches R28 per litre. Economists now say the South African Reserve Bank’s 26 March rate decision is a hold, not a cut. Some are no longer ruling out a hike if the rand weakens further and second-round inflation effects emerge.

Head above water — just

South Africa’s economy grew by 1.1% in 2025, well below the National Treasury’s forecast of 1.4%. This marked the first time growth beat the 1% mark since 2022, and it more than doubled the 0.5% recorded in 2024. Fourth-quarter GDP grew just 0.4%, marking the fifth straight quarter of expansion.

However, manufacturing contracted by 0.6% in the fourth quarter and produced the largest drag on South Africa’s growth. January 2026 data released on 12 March showed a further year-on-year decline of 0.7%, the third consecutive month of contraction. The Absa PMI for February fell to 47.4, marking the fifth consecutive month below 50, indicating a slow-down. Seven of the ten manufacturing sub-sectors reported negative growth in the three months to January, with motor vehicle and transport equipment sales falling by 15.8%.

The sectoral manufacturing drag is important because this is the sector most capable of absorbing South Africa’s structural unemployment. Services and agriculture are growing, but they do not generate jobs at the scale required. An economy that grows at 1.1% while manufacturing contracts cannot meaningfully address an unemployment rate of 31.4%.

Household final consumption expenditure grew by 3.6% year-on-year, while gross fixed capital formation — representing investment in machinery, infrastructure, buildings and vehicles, and arguably the most important economic data point for South Africa’s long-term economic prospects — declined by 2.2% year-on-year.

The Hormuz oil shock will complicate the picture further. Higher energy and production costs will weigh on manufacturers already under margin pressure.

Who owns the purse?

The Western Cape High Court struck down Section 7(4) of the VAT Act on 5 March as unconstitutional. The provision had allowed the finance minister to change the VAT rate by gazette notice. The court found this an impermissible delegation of legislative power.

The ruling is suspended for 24 months to allow Parliament to correct the defect, and must be confirmed by the Constitutional Court before it takes full legal effect. There is no immediate fiscal impact because the 2026 Budget held VAT at 15%.

However, the future significance of the ruling is important. Any future government wishing to use VAT as a fiscal lever must now run it through a Parliament where no single party holds a majority. The next finance minister who needs additional revenue will need to negotiate it rather than announce it. Budget-night tax surprises are over.

For subscribers, the implication is that South Africa’s fiscal course will be more contested, more visible, and arguably more accountable. That is bullish for fiscal prudence and business confidence.

US running out of patience

At the BizNews conference on 10 March, the new US Ambassador, Leo Brent Bozell III, called out B-BBEE policies, the land reform stance, and Pretoria’s failure to distance itself from Iran, while also drawing attention to South Africa’s enormous potential and urging the South African government to strike a deal with the US.

In the Q&A session following his speech, Mr Bozell highlighted that the US government was becoming impatient after not having received a substantive response from the South African government almost a year after communicating its expectations. He said: “We’re running out of patience. We believe that more and more it becomes a statement by the South African government when it doesn’t want to respond to simple questions that we have.”

In his off-the-cuff remarks, Mr Bozell also dismissed the Constitutional Court ruling on the “Kill the Boer” chant, saying: “I don’t care what your courts say, it’s hate speech.” Though he later clarified that this was his personal view and that the US government respected “the independence and findings of South Africa’s judiciary”, the ANC-led international relations department was sufficiently incensed that it summoned Mr Bozell for a formal démarche, a diplomatic protest, over his “undiplomatic remarks”. This represents a rapid sign of displeasure, less than a month after the ambassador’s arrival in South Africa, and suggests that mending the relationship remains elusive.

Lula’s warning to CR

On a visit to Brasilia on 9 March, the Brazilian president, Lula da Silva, warned his South African counterpart that “if we do not prepare ourselves in terms of defence, one day someone will invade us.”

Although the US was not mentioned directly, the remark reflects concern that the war in the Middle East and the broader military assertiveness associated with the Trump administration have exposed military weakness as a liability for middle powers.

Among other memoranda of cooperation in trade, tourism, education, and agriculture, Mr da Silva signed a Defence Cooperation Agreement with South Africa, saying: “We don’t need to keep buying from the ‘Lords of Arms’. We can produce it ourselves.” The agreement covers co-production, shared technological development, and interoperability in the South Atlantic.

Mr da Silva’s defence warning represents the most explicit articulation yet from Brasilia that sovereign military capacity is becoming a requirement in an increasingly coercive international system. The statement reflects a shared assessment among major “Global South” states that great-power unilateralism is re-emerging as a structural feature of the international order.

South Africa’s thinking and capacity were once aligned with this emerging middle-power vision: the country built armoured vehicles, artillery, and naval equipment domestically. But underfunding and policy neglect have hollowed that base out.

Army steps in (again)

This comes at the same time as Mr Ramaphosa has deployed 2,200 members of the South African National Defence Force (SANDF) to support the police across five provinces under Operation Prosper, running from 1 March 2026 to 31 March 2027, at a cost exceeding R800 million and drawing on emergency funding provisions. The targets are gang violence in the Eastern and Western Cape provinces, and illegal mining in Gauteng, the Free State and the North West.

The deployment reflects a state that cannot adequately police its own territory through conventional means. The core problem is the absence of a coherent, updated strategic architecture guiding the use of military force inside the country.

Today, neither the defence department nor the police service operate within a clearly articulated national strategy that defines roles, limits, and priorities for internal security operations. That gap creates a serious governance risk in the way military power is now being used domestically.

Without a defined end state or measurable objectives, the risk is that the SANDF gradually shifts from a defence force toward a long-term internal security instrument as pressure on the police intensifies. If that trajectory continues unchecked, the deployment could persist for years, accelerating institutional strain on the military and fundamentally reshaping South Africa’s civil security balance.