SA retail franchises may be unexpected beneficiaries of the latest US trade tariffs as American brands operating in the country face rising costs and growing operational challenges.
The 30% tariffs, which follow failed negotiations between the US and SA trade officials, are expected to affect the agriculture and automotive sectors most severely. However, Karen Keylock, Nedbank commercial banking national manager for retail services, knock-on effects are also expected to ripple through the retail sector, particularly in franchising where many brands rely heavily on imported products, foreign trademarks and dollar-denominated royalty payments.
Keylock said if American food and beverage chains in SA such as McDonald’s, Starbucks, and Burger King import branded or speciality ingredients to ensure consistency with global standards, they may face higher costs. While some franchises may absorb the additional expense, others could be forced to increase prices or find local substitutes. Either route risks undermining brand consistency or losing price-sensitive customers, she said.
The announcement on the tariff hike came amid a weaker rand and analysts expect further depreciation as export volumes to the US fall. A softer currency raises the cost of franchise fees and royalties paid in dollars, further straining the margins of US franchise operators in SA. Keylock said in some cases franchisers may delay expansion plans or reconsider their SA strategies altogether.
Established SA franchises such as Nando’s, Chicken Licken, Debonairs Pizza operate with locally sourced inputs and more adaptable supply chains could benefit. With fewer exposure points to the US and the dollar, Keylock said these businesses are more insulated from the effects of the tariffs.
As global franchises navigate rising input costs and logistical challenges, domestic brands may gain market share by offering better pricing stability and faster operational responsiveness, she added.
“Local franchises might gain market share in SA if US brands struggle to maintain profitability. Some international brands may pivot to manufacturing or sourcing within SA to avoid tariffs altogether which, in turn, would boost local suppliers.”
Such adjustments could take time but they may ultimately support more integrated and localised supply chains in SA.
“In our experience at Nedbank, SA and African international businesses are resilient and, while they appreciate any support provided, they are strategic enough to take control of their own future by seeking appropriate trade advice and products,” Keylock said.
“We have identified that our clients are already exploring and engaging subject matter experts or are adapting their long-term plans to ensure business survival. These strategies are designed with a view to seeking a more efficient supply chain system, reducing trade barriers and leveraging local supply and demand.”
The SA government says the 30% tariff decision is unilateral and indiscriminate, noting that SA accounts for just 0.25% of total US imports and poses no threat to US national security or industry.
A comprehensive framework deal was submitted to the US in May, aimed at addressing the trade deficit, promoting digital trade and investment, and reducing nontariff barriers. But the US is proceeding with its tariff plans, effective from August 8, though goods already in transit by that date and arriving before October 5 will be charged the existing 10% rate.
The government acknowledged that the tariffs could shave 0.2% off SA’s economic growth, though about 35% of exports remain exempt.
The department of trade, industry & competition will implement several measures to assist exporters in diversifying their markets and managing compliance with new export requirements. A localisation fund and an export and competitiveness support programme are being prepared to provide working capital, equipment funding, and competitiveness support.
The department is also working with the labour department to mitigate job losses. A draft block exemption under the Competition Act will enable exporters to collaborate on shared infrastructure and market access, it said.
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