South Africa’s macroeconomic indicators are showing measured improvement – inflation has moderated, interest rates have eased, loadshedding has largely stabilised and the sovereign credit rating has been upgraded for the first time in nearly two decades. And yet, retail growth remains structurally constrained.
Retail growth to remain muted despite improving economic indicators. Image supplied
Looking at the numbers, we see that real GDP is forecast at around +1.4% for 2026, while real retail trade sales are expected to grow at roughly +2% to +2.5%, i.e. lower than 2025’s performance. Consumer confidence remains negative at -9 in Q4 2025 and household debt and credit extension continue to rise.
The picture emerging is one of stabilisation, but not acceleration.
According to Carey Leighton, economist at Trade Intelligence (Ti), “The economic indicators are showing signs of moving in the right direction, but they are doing so off a low base.
Stabilisation is helpful, but it doesn’t immediately translate into meaningful demand expansion in FMCG retail.”
For retailers, suppliers and service providers, this creates a far more nuanced operating environment than headline economic recovery might suggest.
The math behind the squeeze on shoppers
Yes, inflation is moderating. Total CPI is forecast at around 3.5% for 2026, with food inflation at approximately 3.7%. The prime interest rate is expected to ease further towards 9.75%. All these positive developments will provide relief.
So why are shoppers still so constrained? The clearest explanation for current retail dynamics lies in a simple divergence.
Between 2019 and 2025, the minimum wage increased by +44%. Over the same period, the cost of food grew +69%. A basic grocery basket for a family of seven now stands at R5,414 per month – and even that basket is largely restricted to staple foods and essential products.
The cumulative pressure of the past five years has reshaped shopper behaviour. South African shoppers continue to:
- Trade down on pack sizes and brands
- Shop across multiple retailers in search of deals
- Combine purchasing power informally to benefit from bulk discounts
- Expand credit or delay discretionary purchases
In addition, unemployment remains above 40%. Consumer confidence has been in negative territory for more than five years and credit-active consumers carry debt levels to the tune of R62 for every R100 earned.
“These pressures are structural,” says Leighton. “Even as inflation eases, household balance sheets remain tight. That shapes how shoppers prioritise categories, channels and brands.”
For FMCG, the implication is clear: volume recovery will be uneven and channel-dependent.
A split retail performance
Retail performance data reinforces this divergence.
Overall, real retail trade sales growth came in at +2.5% during 2024, illustrating muted growth. Within that, however, performance varied sharply by format and category.
Discounters showed double-digit growth in 2024, albeit off a small base, as they still account for only 7% of FMCG. E-commerce expanded by +42.6%, but makes up just 5.7% of total retail.
And health and personal care specialists (the likes of Clicks and Dis-Chem) outpaced the total market for the seventh consecutive year. Private label topped R100bn and continues to outgrow branded segments.
The result is what can be described as a retail market pulling in different directions: on the one hand, we have a constrained, value-driven core FMCG base. While on the other, pockets of concentrated growth are being seen in specific formats and adjacencies.
Andrea Slabber, insights lead at Ti, explains: “Performance gaps between channels are becoming more consequential. To compete effectively, FMCG retail businesses need to understand exactly where the momentum sits and why.”
That understanding requires connecting macroeconomic indicators to shopper behaviour, to channel performance, to in-store execution.
Where the growth is, and why it matters
Several growth vectors are emerging clearly.
Private brands
Retailer-owned brands continue to expand across economy, standard and premium tiers. Premium private label, in particular, is strengthening margin advantages for retailers while offering affordability ladders to shoppers. For suppliers, this presents both competitive pressure and manufacturing opportunity.
The continued rise of private brands is unpacked in greater detail in Ti’s forthcoming Private Brands Report.
Health and beauty
Health and beauty is extending into unconventional spaces, from wellness-infused beverages to aromatherapy-driven homecare and healthy snacks. The category’s outperformance reflects shoppers’ prioritisation of personal care and emotional wellbeing, even under budget pressure.
Liquor
Off-trade liquor (i.e. private consumption at home) remains competitive, with retailers diversifying ranges to increase basket size. The channel is also navigating congestion from non-alcoholic adjacencies. Understanding format-specific dynamics is critical, particularly as interest rate relief influences discretionary spending.
Food-To-Go
Supermarket hot-food counters and deli expansions are reshaping the boundary between retail and foodservice. Forty-five percent of shoppers report buying regularly from supermarket hot food counters. This creates implications for ranging, packaging, supply chains and adjacent categories.
E-commerce
Although small in FMCG share terms, the channel continues to scale. Growth reflects increasing universes of e-commerce-enabled stores rather than pure-play digital expansion. Route-to-market strategies must adapt accordingly.
The common thread seen here is uneven momentum. “Growth exists,” says Slabber. “But it is concentrated in certain pockets. The winners are those who allocate capital and trade investment in line with structural channel realities.”
The operational overlay: Improving, but fragile
There are genuine operational improvements.
Loadshedding stabilised through the second half of 2024 and had minimal impact in 2025. Logistics reform momentum is reducing delays and improving inbound reliability, albeit unevenly.
Fixed capital investment increased by +1.6% in Q3 2025 after three quarters of decline, and the stronger rand has supported lower fuel prices.
These factors reduce cost-to-serve volatility and spoilage risk, while improving on-shelf availability.
However, risks remain, such as:
- AGOA uncertainty and US trade policy shifts
- Electricity price inflation above 9%
- Geopolitical volatility affecting commodity inputs
- Persistently high unemployment
The recovery is measurable, but fragile.
What this means for suppliers, retailers and service providers
“Muted growth forces sharper choices,” says Slabber. “When the tide is not rising quickly, share gains come from precision, not broad expansion.”
For suppliers, this means portfolio architecture and channel precision matter more than topline ambition. Margin mix, pack-price architecture and private label strategy require careful calibration against shopper income segmentation.
For retailers, tiered private brands, format innovation and adjacency expansion are central to protecting profitability in a low-growth environment.
For service providers – from logistics firms to banks and merchandising companies – cost-to-serve optimisation and credit risk management remain critical.
