South African business insolvencies are projected to stabilize in 2026 before experiencing a modest increase in 2027, according to Allianz. This outlook contrasts sharply with global expectations, where Allianz forecasts a significant 6% rise in business insolvencies during 2026, following a similar 6% increase anticipated for 2025. The data suggests a distinct trajectory for South Africa compared to the broader international trend in corporate distress, noting a relative resilience in the local business environment even as global challenges mount.
South African Insolvency Outlook
Allianz Trade forecasts local insolvencies will move from 1,534 cases in 2025 to 1,540 in 2026 and 1,590 in 2027. This projection indicates a period of relative stability before a slight uptick. This trend follows a notable decline in insolvencies observed in South Africa, which fell from 1,657 cases in 2023 to 1,551 in 2024. The number of cases is projected to further decrease to 1,534 in 2025 before starting to rise again in the subsequent years. The anticipated stabilisation in 2026, followed by a modest increase in 2027, positions South Africa with a more favourable short-term outlook compared to many other regions.
The 2025 insolvency levels were approximately 18% below the country’s 10-year average, a significant indicator of improved corporate health. The projected insolvency figures for 2025 represent an even more substantial reduction, standing roughly 40% below the 20-year average for South Africa. This suggests a period of relatively lower corporate distress compared to historical benchmarks, reflecting a potentially more strong economic footing for businesses in the country. South Africa remained below both pre-pandemic and Global Financial Crisis insolvency benchmarks in 2025, indicating a more stable environment for businesses than during previous widespread economic downturns. This sustained performance below long-term averages provides a measure of confidence in the local economy's ability to withstand external pressures, at least in the near term.
Global Pressures and Drivers
The Middle East conflict is exerting considerable pressure on global energy markets, contributing to inflationary pressures, tightening financial conditions, and impacting overall business confidence across various regions. These multifaceted spillovers from the Middle East conflict have consequently delayed the anticipated stabilisation in global insolvency levels until 2027, according to Allianz. The conflict’s ripple effects are broad, influencing commodity prices and supply chains worldwide. The conflict is estimated to lead to approximately 15,000 additional insolvency cases globally across 2026 and 2027, showing the significant economic toll of geopolitical instability.
Globally, Allianz expects business insolvencies to rise by 6% in 2026, following a similar increase of 6% in 2025. This consistent upward trend signals a challenging period for businesses worldwide. Allianz forecasts that insolvencies in China will experience a substantial 9% rise in 2026, followed by another 5% increase in 2027, indicating significant stress within the Asian economic powerhouse. Similarly, Western European insolvencies are projected to increase by an additional 3% in 2026 before seeing a slight easing in 2027, reflecting ongoing economic vulnerabilities in the region. Globally, Allianz estimates that 2.2 million jobs could be directly at risk from insolvencies in 2026 alone, noting the severe human and economic consequences of widespread corporate distress. This figure represents a stark reminder of the interconnectedness of global economies and the potential for business failures to impact livelihoods on a massive scale.
Expert Commentary and Sector Impact
Global pressures contributing to corporate insolvencies include elevated energy and logistics costs, which squeeze profit margins and increase operational expenses for businesses. Ongoing supply-chain disruptions continue to hinder production and delivery capabilities, creating inefficiencies and uncertainty. Diminished business confidence leads to reduced investment and cautious spending, slowing economic activity. Tighter financial conditions, driven by rising interest rates and more stringent lending criteria, make it more challenging for companies to access capital and manage debt, exacerbating financial strain.
Certain sectors are experiencing the most significant strain from insolvencies, notably construction, retail, and services. These sectors are often highly sensitive to economic fluctuations, consumer spending patterns, and input costs. The construction industry, for instance, is vulnerable to rising material costs and interest rates, which can impact project viability, particularly as projects often rely on substantial upfront capital and are susceptible to delays from supply chain issues. The retail sector faces challenges from shifting consumer behaviour, inflationary pressures on household budgets, and intense competition, which can lead to reduced consumer spending on non-essential goods and services. The services sector, broad and diverse, can be affected by reduced discretionary spending and labour market dynamics, with businesses ranging from hospitality to professional services feeling the pinch of economic uncertainty and reduced corporate budgets.
Asia is anticipated to continue as the largest contributor to the increase in global insolvencies, primarily driven by the trends observed in China. The sheer scale of China's economy means that any significant rise in insolvencies there has a substantial impact on the global figures. Western Europe is also projected to remain under pressure due to its reliance on imported energy, making it susceptible to global energy market volatility, and the inherent vulnerability of specific sectors within its economy. This includes industries like manufacturing, which are heavily dependent on stable energy prices and strong supply chains, and consumer-facing businesses that are sensitive to economic downturns and reduced household purchasing power. The combination of these factors creates a complex and challenging environment for businesses on a global scale, even as South Africa appears to navigate these headwinds with a comparatively more stable outlook for the immediate future.
