South African Families Feel Recovery Slip Away as Spending Slows

SOUTH AFRICA’S ECONOMIC RECOVERY LOSING STEAM AS CONSUMER SPENDING FALTERS

Six consecutive quarters of rising consumer spending gave South African households a rare sense of forward momentum. That momentum is now fading. Both consumer spending and income growth slowed sharply in the first quarter of 2026, signaling that the modest recovery many ordinary South Africans had begun to feel may already be running out of road.

Nicky Weimar, Nedbank’s chief economist, delivered this assessment to delegates at the 2026 Nedgroup Investments Treasurers’ Conference. The picture he painted was sobering: households and workers face a prolonged stretch of sluggish growth that will do little to ease unemployment or improve daily living standards.

The numbers reveal how fragile last year’s surface recovery actually was. South Africa’s GDP grew 1.1% in 2025, a rebound from years of stagnation. But that growth rested almost entirely on what families chose to spend. Consumer spending expanded 3.6% and contributed 2.3 percentage points to overall growth. Fixed investment, by contrast, contracted 2.2%, dragging growth down by 0.3 percentage points. The country’s trade position deteriorated further as exports fell 2.5% while imports rose 1.1%, subtracting a full percentage point from GDP growth. “That’s not a sustainable growth recipe,” Weimar observed, noting that an economy relying on households to spend rather than businesses to invest is essentially running on borrowed time.

The structural weakness becomes clearest when examining capital formation. Fixed investment has averaged just 14.1% of GDP since the pandemic ended, well below the 16.7% recorded before it. Despite the government’s announcement of R1 trillion in infrastructure spending over three years, focused on logistics and energy, public sector outlays remain volatile and private sector investment has retreated. Weimar described current infrastructure spending levels as “extremely low,” and even as the rate of decline slows, investment remains far below what would be needed to lift growth in any meaningful way.

For workers and exporters, global pressures are intensifying the squeeze. China, facing enormous excess production capacity and US tariffs, is aggressively redirecting exports toward non-US markets, South Africa among them. Imports of Chinese vehicles, parts, and accessories have surged from near-zero a decade ago to nearly R5 billion currently. Higher US tariffs globally have sharpened price competition across non-US markets, adding another layer of pressure to South African manufacturers and exporters already struggling with weak domestic demand.

Meanwhile, inflation relief appears temporary at best. Fuel price hikes pushed inflation to 5% in the first half of 2026, and services inflation now sits at 5% year-on-year, a persistent puzzle. Food prices have benefited from good harvests and falling commodity costs, but that advantage is fragile. A poor crop season, or continued disruptions to Middle Eastern shipping lanes where a US-Iran conflict has already created supply shocks, could quickly reverse those gains. Weimar warned that risks remain “stacked to the upside,” with oil price shocks, fertilizer supply constraints, El Nino weather threats, and rising inflation expectations all posing dangers to price stability, according to analysis referenced at https://novuspressbulletin.co.za/blog/south-africa-s-economic-recovery-losing-momentum-nedbank-warns.

The rand has strengthened significantly despite global instability, supported by structural reforms and improved fiscal management. Trading around R16.20 to the US dollar, it is stronger than at any point in 2024 or 2025. For consumers, cheaper imported goods offer some relief. For exporters, it is another competitive headwind, adding pressure to already-stressed manufacturing and mining sectors.

Weimar’s revised forecasts for 2027 and 2028 reflect this deteriorating outlook. Consumer spending growth is expected to slow to between 1.8% and 2.1% annually, contributing to overall GDP growth of just above 1.4% in 2027, a pace that barely keeps up with population growth and does nothing to address unemployment. Exporters face mounting global price competition and heightened uncertainty. Households, growing more cautious in response to higher inflation and fears of further interest rate hikes, will keep spending, but more carefully.

Weimar stressed that rapid execution of structural reforms and an accelerated rollout of the government’s infrastructure plans are essential to lifting growth and reducing unemployment. Without that, the question facing ordinary South Africans is not whether conditions will improve, but how many more years of stagnant wages and persistent joblessness they will have to absorb before they do.