South Africa's Growth Stalls as Household Spending Hits a Wall

South Africa’s economy has now strung together six consecutive quarters of expansion, but the first quarter of 2026 told a quieter story: growth of just 0.5%, and a consumer base visibly running out of room.

Professional services firm PwC now forecasts GDP growth of around 1.2% for 2026, a figure broadly aligned with the South African Reserve Bank’s own expectations. The firm’s latest mid-year economic update, however, carries a pointed warning: the recovery is becoming uneven and fragile as rising global costs filter through to businesses and households across the economy.

Much of the pressure originates in geopolitical tensions in the Middle East, which have driven up global oil prices. For South Africa, an oil-importing nation, the consequences have been swift. Higher fuel costs have weakened the rand, lifted transport and energy expenses, and pushed inflation to 4% after a period of relatively low base readings. The Reserve Bank responded by raising interest rates to 7% in May, a move that has compounded the squeeze on indebted households.

Lullu Krugel, chief economist and Africa sustainability leader at PwC South Africa, framed the situation plainly: “South Africa’s economic recovery is holding, but it is becoming increasingly uneven and fragile. While domestic conditions have improved, the economy is now facing renewed pressure from rising costs and global uncertainty.”

Dirk Mostert, lead economist and sustainability associate director at PwC South Africa, pointed to the external environment as a primary driver. “Higher fuel prices, a weaker rand, and persistent global uncertainty are placing pressure on costs and margins,” he said. “This is slowing the pace of recovery and reinforcing the need for businesses to plan for a more prolonged period of elevated costs and interest rates.” PwC expects rates to stay elevated well into the remainder of the year, offering little relief to households carrying debt.

Consumer confidence has already cracked. The FNB/BER Consumer Confidence Index fell sharply from minus 7 in the first quarter to minus 19 in the second, its weakest reading since early 2025. The Bureau for Economic Research attributed much of that deterioration to higher fuel costs and growing pressure on disposable incomes.

A Debt Rescue consumer survey reinforces the picture. Nearly half of respondents said they did not know how they would cope with another interest rate increase. More than three-quarters expected borrowing costs to rise further before year-end. More than half identified food, electricity and other household essentials as the first items they would cut if finances tightened.

The depth of the problem among lower-income households is captured in the Pietermaritzburg Economic Justice and Dignity Group’s Household Affordability Index. These families are increasingly forced to prioritize transport and electricity costs before purchasing food, leaving progressively less money available for nutritious groceries as living costs climb.

By contrast, the sectors underpinning the six-quarter growth streak, including finance, agriculture, trade and transport, have performed with relative resilience. Household spending and exports have carried much of the load. Yet PwC warned that even these supports are beginning to soften as business confidence weakens, investment slows and manufacturing activity remains subdued.

Anastacia Tshesane, chief executive of PwC South Africa, acknowledged the country’s long-term investment appeal, citing its financial markets and resilient private sector. She cautioned, though, that sustained investment would depend on policy certainty, public-private collaboration and a stable macroeconomic environment. Without those conditions in place, the question hanging over the second half of 2026 is whether six quarters of hard-won expansion can survive the weight now pressing down on it.