Storm coming for households in South Africa

South African households could face mounting pressure at the start of 2027, as the effects of high inflation and fuel prices become more apparent.

This is despite indicators pointing to a healthy financial situation in South Africa in the first half of the year.

In the first half of 2026, real personal disposable income increased by 0.1% and 0.2% over the first and second quarters, respectively.

This should point to improved financial conditions among households in the country, but Nedbank economists flagged several underlying issues.

The group said the increase in disposable income earlier this year came primarily from sources such as dividends and rental income, rather than from higher wages.

Other factors, such as relatively favourable interest rates and withdrawals from retirement savings, also increased consumer spending.

This, according to Nedbank’s economists, creates less stable growth than wage growth, despite still increasing disposable income.

“The reliance on non-labour income sources highlights the fragility of the current consumer recovery,” the group said.

For this wage growth to occur, the economists said South Africa needed stronger job creation.

In the third quarter of 2026, the national unemployment rate was 36.7%, a 0.1% increase from the previous quarter and the second consecutive increase during the year.

“Sustainable improvements in household finances ultimately depend on stronger and more broad-based employment growth,” the economists said. “Unfortunately, the economy continues to struggle to generate sufficient jobs.”

Deteriorating financial conditions in the second half of 2026 were also flagged by Nedbank as a concern for South Africa’s households.

Nedbank said that consistent fuel price increases had driven inflation upwards, and expected this pressure to continue.

Inflation in 2026 peaked at 5% in June and has remained consistently high throughout the year.

The high inflation, which has consistently remained above South Africa’s 3% target, has been largely caused by high fuel prices.

The consistent fuel price increases have been driven by high global oil prices following the closure of the Strait of Hormuz due to the war in Iran.

Petrol and diesel prices have remained elevated despite government intervention in the last two months of 2026, reducing the General Fuel Levy (GFL).

This levy reduction led to a decrease in petrol prices in November 2026, but only by 1 cent.

Mounting pressure

Nedbank economists said there is likely to be mounting pressure on South African households, as previous support becomes less pronounced.

This includes non-income wage growth and withdrawals from retirement savings accounts.

“Household finances are expected to come under increasing pressure over the remainder of 2026 and into 2027,” Nedbank said.

“The temporary support provided by non-wage income growth, retirement savings withdrawals and the lingering benefits of previous interest-rate reductions is likely to fade.”

As this support fades, other factors such as higher inflation and fuel prices are expected to become more impactful.

“The adverse effects of higher fuel prices, accelerating inflation and tighter monetary policy will become increasingly pronounced,” Nedbank noted.

The South African Reserve Bank (SARB) has become increasingly hawkish in 2026 to curb persistently high inflation.

Despite the tighter monetary policy from the Reserve Bank, Nedbank said the effects of high inflation would still be felt by households.

This, it noted, is because the cause of the inflation is largely upstream, which is less affected by higher interest rates.

High fuel prices are a major cause of higher consumer and business spending, accelerating inflation.

The high prices are driven by global conflicts, such as those in Iran and Ukraine, which are weighing on the global oil market.

“The current inflation shock is largely supply-driven, reflecting higher global oil prices and geopolitical developments rather than excessive domestic demand,” Nedbank said.

“This limits the effectiveness of monetary policy in addressing the underlying source of inflation.”