Nedbank Group chief economist Nicky Weimar is still discussing last week’s inflation release when, mid-call, she stops to reconsider her rate forecast for next month — and pivots.
“We still had a September hike [projected],” she tells the FM. “I’m starting to think that’s unlikely. That doesn’t mean I don’t think there remains space for one more hike. But maybe it will come in November.”
Such a shift would put the focus back on the South African consumer — the economy’s main engine and, in Weimar’s view, one of its few remaining levers.
“If the consumer spends at a slower pace, we’ll grow at a slower pace,” Weimar says. “It’s like a chain reaction.”
She expects households will hold up. “Most consumers are still, in terms of real income, in the black, so they remain in a relatively good place,” she says. “Interest rates continue to be way lower than at the previous peak. So debt service cost is not consuming a huge amount of people’s disposable or discretionary income.”
But consumption growth is slowing. Household final consumption expenditure grew 3.6% in 2025, up from 1% in 2024 but just 0.1% in the first quarter of 2026 — its weakest performance in two years. Retail sales lost momentum, growing 1.6% year on year in June from 2.3% in May.
“As a whole, this year will be softer,” Weimar says. If spending weakens further, “I don’t think there’s anything that will replace it. We won’t necessarily shrink, but we will definitely slow.”
Fixed investment contracted in the first quarter; government infrastructure spending hasn’t gained enough momentum to lift growth. Nedbank expects GDP growth to improve to 1.3% this year from 1.1% in 2025, before rising to 1.4% in 2027.
That’s far from President Cyril Ramaphosa’s ambition to put South Africa “onto a path of sustained GDP growth of more than 3% per annum, and contribute towards the creation of 1-million additional jobs by 2030”.
There have been green shoots: load-shedding ended, rail and port performance improved, the rand strengthened, and S&P and Fitch upgraded the rating. But structural constraints remain formidable.
Electricity, water and municipal costs have, over some periods, risen at two to three times inflation, Weimar says. High operating costs, regulatory burdens and weak infrastructure make it hard for local businesses to compete. The government has eased power cuts and logistics bottlenecks, but not enough to unlock investment.
“Until it does, you can’t say to companies: ‘You go out there and flourish now. Why aren’t you investing?’ Because you haven’t changed the financial equation.”
The immediate complication is inflation. July’s better-than-expected print came in at 4.3%, down from a two-year high of 5% in June and below the 4.5% median forecast in a Bloomberg survey. It came exactly as Nedbank had forecast.
Chris Hattingh of the Centre for Risk Analysis says food is the bigger vulnerability in July’s print, more so than fuel. Food and nonalcoholic beverage inflation slowed to 0.9%, its lowest level in more than 16 years, on cereal deflation and lower meat prices. But the grain and livestock cycles are vulnerable to a poor rainy season. A weather-driven reversal, Hattingh argues, would push inflation higher just as the relief from July’s fuel price cut fades.
The petrol price cut did much of the work. Transport inflation slowed to 8.9% in July from 12.7% in June, after petrol prices fell 7.1% and diesel prices 11.7%. Yet petrol was still 19.3% more expensive than a year earlier, and diesel 28.8%.
Weimar agrees that the weather outlook is crucial and fears food deflation may have bottomed. “If there is an El Niño now and it extends into 2027, I’d start to worry.” Still, there’s no argument for hiking aggressively, she says. Monetary policy is already “somewhat restrictive”, though the cushion has been lessened by this year’s rise in inflation.
Alexforbes macroeconomist Sifiso Mkhwanazi expects a 25 basis point increase. PSG Financial Services chief economist Johann Els argues for a hold, pointing to the “almost complete absence of second-round effects from higher fuel costs” and a firmer rand.
For Weimar, the rate debate is ultimately a growth debate. The consumer can keep carrying the economy — just not at last year’s pace.
“That’s the problem with an economy that has so few drivers of growth,” she says.
