South Africa’s Consumer Slowdown Signals Deeper Shifts Beyond Interest Rates And Monetary Policy

South Africa’s consumer landscape is shifting, but according to Dr?Greg Cline, head of portfolio management at Investec, this change isn’t being driven by interest rates anymore (Image source: © 123rf 123rf)

Despite four interest rate cuts in 2025, which saw the prime lending rate ease from 11.25% to 10.25%, consumer demand has remained stubbornly subdued.

Stronger rand

The rand has strengthened by approximately 13% over the past three months, with momentum continuing into early 2026.

Trading at just under R16.00 to the US dollar, the currency is at levels last seen in August 2022.

For an import-dependent economy like South Africa, which brings in more than R1.6tr worth of goods annually, this shift is significant.

The recent currency run translates into a direct benefit of just over 10% on the landed cost of imported goods - before factoring in potential improvements in freight and logistics costs.

This marks the first meaningful reduction in supplier input costs in nearly four years, creating breathing room for businesses that have been absorbing rising costs in a low-growth environment.”

Why this matters

The retail sector offers a clear illustration of why this matters.

December trade was described as one of “cautious resilience”, with modest growth translating into a 7.9% increase compared to December 2024.

While encouraging, this growth largely kept pace with inflation rather than signalling a step-change in consumer demand.

Over the past year, retailers have struggled with slow sales, tight consumer budgets and many shoppers being unable to take on more credit.

Even the two-pot retirement system and rate cuts weren’t enough to push economic growth much above 1.3%.

What changes in 2026, however, is not consumer appetite for debt, but the cost structure behind the shelves.

Freight rates easing

A stronger rand lowers the cost of goods, while freight rates - quoted in dollars - are also easing.

Shipping dynamics are also improving further as major carriers such as CMA, CGM and Maersk begin reintroducing Suez Canal sailings in 2026.

Shorter routes from Europe and Asia cut thousands of miles off journeys to South Africa, improving container availability and putting downward pressure on shipping costs.

For retailers, this cost relief allows more flexibility - whether in pricing, promotions or stock decisions - without relying on consumers to borrow more.

It helps protect margins, refresh product ranges and offer better value in a strategic way rather than reactively.

For consumers, the benefits will likely be gradual rather than dramatic. But they will be meaningful: better stock on shelves, improved value and slowly easing price pressures.

Optimism grounded in real cost relief

Optimism is no longer anchored in rate cuts. It is grounded in something more fundamental: real cost relief throughout the supply chain.

This supports businesses first and then creates space for consumers to recover without taking on more debt.

Relief, not rates, may finally be the catalyst the economy has been waiting for.