South Africa’s fragile economic recovery is at risk of stalling, according to Nicky Weimar, Nedbank’s chief economist, who told delegates at the 2026 Nedgroup Investments Treasurers’ Conference that the country faces a dangerous combination of weak investment, mounting inflation pressures, and growing export challenges that threaten to derail growth prospects.
Weimar paints a sobering picture of an economy that appears to be losing momentum as it heads into the second half of 2026, one where consumer spending alone cannot sustain the nation through an increasingly turbulent global environment.
South Africa’s growth story is a nuanced one: The economy improved in 2025 after years of stagnation, with GDP growth rebounding to 1.1%. However, Weimar’s analysis reveals a troubling reality: this growth was “driven almost exclusively by consumer spending,” growing by a robust 3.6% and contributing 2.3 percentage points to GDP growth in 2025, while fixed investment shrunk 2.2% and shaved 0.3 percentage points off GDP growth and the country’s net trade position deteriorated, subtracting 1 percentage point off GDP growth as exports contracted by a sharp 2.5% and imports rose by 1.1%.
“That’s not a sustainable growth recipe,” Weimar suggests. Consumer-led growth without corresponding business investment indicates an economy running on fumes rather than building for the future.
The warning signs have already appeared. After six consecutive quarters of acceleration, real income and consumer spending both slowed in the first quarter of 2026, suggesting the tailwinds that powered the recovery are already dissipating.
Perhaps most alarming is the persistent weakness in fixed investment. Despite government’s ambitious announcement of R1 trillion in infrastructure spending over three years, with emphasis on logistics and energy, capital formation remains dangerously low, averaging just 14.1% of GDP since the pandemic, well below the pre-pandemic average of 16.7%.
Weimar notes that while “the rate of decline is slowing,” it remains far below levels required to lift GDP growth materially. Public sector outlays are volatile, and private sector investment has relapsed, leaving infrastructure spending at “extremely low levels.”
The government’s infrastructure plans, while welcome, face execution risks amid business uncertainty and competing policy pressures. Without sustained private sector participation, the public spending will struggle to generate the multiplier effects needed to transform the economy.
Adding to economic headwinds are deteriorating export prospects. China, with its enormous excess production capacity is aggressively directing exports toward non-US markets in response to US tariffs, including South Africa. The result: South African imports of Chinese vehicles, parts, and accessories have surged from near-zero a decade ago to nearly R5 billion currently. Consequently, higher US tariffs globally have increased price competitions in non-US markets significantly, adding to South Africa’s competitive challenges.
Consumer relief from recent inflation moderation appears temporary. Fuel price hikes account for the bulk of inflation’s acceleration to 5% in the first half of 2026, but Weimar warns that other pressures are building.
Services inflation, now at 5 % year-on-year, is a particular puzzle and concern. While food prices have benefited from good harvests and falling commodity costs, this 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 these gains.
The war-related energy supply disruption has been less severe than feared, with Brent crude fluctuating between roughly R75-R130 per barrel depending on escalation fears. But Weimar cautions that risks remain “stacked to the upside,” oil price shocks, fertiliser supply constraints, El Niño weather threats and expectations of higher inflation all pose dangers.
“We expect inflation to stay elevated, ending the year at above 4%,” the presentation states, with monetary policy remaining tight for as long as energy shocks persist.
The South African currency has strengthened significantly despite global instability, supported by structural reforms, improved fiscal outlays, lower inflation targets, and favourable export-to-import price ratios. At current levels, trading around R16.20 to the US dollar, the currency is still stronger than at any time in 2025 and 2024.
For consumers, this is a welcome relief, imported goods are cheaper. For exporters, it’s a nightmare, adding another layer of competitive pressure to already-stressed manufacturing and mining sectors.
Weimar’s forecast for 2027-2028 has been revised downward. Expected consumer spending growth of 1.8-2.1% annually will contribute to overall GDP growth above 1.4% in 2027, a pace that barely keeps pace with population growth and does nothing to address unemployment.
The near-term outlook now reflects an economy that will grow, but slowly and unevenly, with exporters struggling amid mounting global price competition and heightened uncertainty due to the US-Iran war and the mounting squeeze in global energy markets, while consumer spending will remain positive but probably slow as consumer become more cautions in response to higher inflation and fears of further interest rate hikes.
Weimar stresses by rapid execution of structural reforms and an accelerated rollout of government’s infrastructure plans are essential to lifting the country’s growth rate and reducing unemployment.