The fallout from the Middle East conflict is reversing the economic props that have supported South African businesses, with insolvencies expected to start ticking up in 2026 after several years of decline.
This year, local business insolvencies — the state in which companies can no longer pay their debts — are expected to edge up to 1,540, having tracked lower from 1,657 in 2023 to 1,534 by 2025. Insolvencies should rise further to 1,590 in 2027, international insurance company Allianz Trade says in its latest global insolvency outlook.
The report comes after Stats SA data last week showed that liquidations — the formal legal process of closing companies including those that are insolvent — increased by 1.1% to 377 in the first quarter of 2026 compared with the same period last year.
The present environment is likely to reshape the insolvency outlook as the crisis in the Middle East is reversing the positives that were in place for South African companies, notably interest rate cuts, lower fuel prices, business sentiment and economic momentum, Allianz said.
“While South Africa has benefited from a multiyear decline in business insolvencies, the environment is clearly becoming more fragile. Global geopolitical tensions, particularly in the Middle East, are reversing some of the tailwinds that supported local businesses in recent years,” the company’s South Africa country manager, Luke Morawitz, said.
“As cost pressures rise and financial conditions tighten, South African companies will need to reassess their risk exposure and place greater focus on cash-flow resilience and credit risk management.”
Among other consequences of the conflict, which has constrained the flow of oil through the Strait of Hormuz, South African businesses have had to contend with steep fuel price hikes since April 1, increasing production costs.
The South African Reserve Bank has signalled that it will keep a close lookout for the second-round effects of the fuel price leap and might have to raise interest rates to “sustain low and stable inflation and all the benefits that brings”.
Allianz’s global insolvency index rose 6% year on year to 150 in 2025, ending the year 19% above its average before the Covid-19 pandemic but below its level during the financial crisis of 2007-08.
South Africa was among a minority of countries that ended last year without reaching any of the two references, including Denmark, the Netherlands, Norway, Portugal and Russia.
“At this stage, under a baseline scenario assuming a progressive normalisation in the Strait of Hormuz by May, we expect our global insolvency index to rise by 6% in 2026…. This would result in a fifth consecutive year of growing insolvencies before a plateau in 2027,” Allianz said.
Globally, the direct toll due to the Middle East war represents 7,000 additional insolvency cases for 2026 and 7,900 for the next year, it said.
“This situation is driving up costs across global value chains, from agrifood to manufacturing, healthcare and technology. It also exacerbates pressures on energy-intensive sectors such as transportation, chemicals and metals,” said Allianz Trade CFO Aylin Somersan Coqui.
“The combination of weaker demand, rising input costs and tighter financial conditions is straining companies with weak pricing power, thin margins, high debt levels or structurally higher working capital requirements.”
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