Middle East Tensions Threaten South Africa’s Corporate Recovery
After several years of declining corporate insolvencies, South Africa is poised for a reversal in 2026. Data from Allianz Trade’s latest global insolvency outlook and recent statistics from Statistics South Africa (Stats SA) suggest that the number of bankruptcies will climb again, driven largely by the economic fallout from the ongoing Middle East conflict.
Projected Rise in Bankruptcies
Allianz Trade forecasts that local corporate bankruptcies will increase to 1,540 cases in 2026, up from 1,534 in 2025 and a modest decline from the 1,657 recorded in 2023. The outlook expects a further rise to 1,590 bankruptcies in 2027 before the trend stabilises.
These projections align with Stats SA’s quarterly liquidation figures, which showed a 1.1 % increase to 377 liquidations in Q1 2026 compared with the same period in 2025.
How the Middle East Crisis Is Affecting SA Businesses
The conflict has disrupted oil flows through the Strait of Hormuz, prompting sharp fuel price hikes in South Africa since April 2024. Higher fuel costs raise production expenses across energy‑intensive sectors such as transport, chemicals, and metals.
According to Luke Morawitz, Allianz Trade’s country manager for South Africa, the geopolitical tension is “reversing some of the tailwinds that have supported local businesses in recent years,” including:
- Interest‑rate cuts that had lowered borrowing costs
- Lower fuel prices that previously eased input‑cost pressures
- Improved business sentiment and economic dynamism
Morawitz warns that as cost pressures mount and financing conditions tighten, companies will need to strengthen cash‑flow resilience and tighten credit‑risk management.
Allianz Trade’s Global Insolvency Index
The firm’s global insolvency index rose 6 % year‑on‑year to 150 in 2025, placing it 19 % above its pre‑COVID‑19 average but still below the peak seen during the 2007‑2008 financial crisis. South Africa was among a small group of nations that failed to meet either the pre‑pandemic benchmark or the crisis‑level threshold in 2025, alongside Denmark, the Netherlands, Norway, Portugal, and Russia.
Under a baseline scenario assuming gradual normalization of the Strait of Hormuz by May 2026, Allianz projects a further 6 % increase in the global insolvency index for 2026, marking a fifth consecutive year of rising insolvencies before a plateau in 2027.
Global Ripple Effects
Aylin Somersan Coqui, CFO of Allianz Trade, notes that the Middle East war is “driving up costs across global value chains, from agri‑food to manufacturing, healthcare and technology.” The direct burden is expected to generate an additional 7,000 insolvency cases worldwide in 2026 and 7,900 in 2027.
These pressures are felt most acutely by firms with:
- Weak pricing power
- Low profit margins
- High leverage
- Structurally high working‑capital needs
Policy Response and Business Adaptation
The South African Reserve Bank has signalled it will monitor the second‑round effects of the fuel price surge closely and may consider raising interest rates to preserve low, stable inflation. Such a move would further tighten financing conditions, underscoring the need for businesses to:
- Review debt structures and interest‑rate exposure
- Enhance liquidity buffers
- Diversify supply chains to reduce reliance on volatile fuel markets
- Implement stricter credit‑control measures
Industry analysts suggest that sectors able to pass on cost increases—or those with strong hedging strategies—will fare better, while marginal operators may face heightened insolvency risk.
Conclusion
The convergence of higher fuel prices, tighter monetary policy, and lingering geopolitical instability is eroding the economic pillars that have supported South African corporations in recent years. While the country enjoyed a multi‑year decline in bankruptcies, the latest data from Allianz Trade and Stats SA point to a resurgence in insolvencies beginning in 2026. Companies that proactively manage cash flow, reassess leverage, and adapt to a more volatile cost environment will be best positioned to navigate this challenging landscape.
