Squeezed on Both Sides: What 2026’s Rising Costs Mean for South African Restaurants and Bars
You can usually feel a hard winter before you can count it. A table of four orders two mains and a fistful of side plates. The Friday regular who used to come weekly is in once a fortnight. The room is quieter than last July, and it isn’t your imagination.
What’s different this year is that the quiet has arrived at the same moment your costs jumped. Meat is running about 7% above a year ago, according to Stats SA. The rand, around R16.40, is still lifting the price of everything behind the bar. And on 28 May the Reserve Bank raised the repo rate to 7%, its first hike since 2023 (Daily Maverick). We’ve funded restaurants and bars through more than a decade of these cycles at Merchant Capital, and this is the shape of the quarters that actually hurt: pressure on the plate and pressure on the till, at the same time.
The squeeze is coming from both ends
Take the costs first. Beef is the one you feel most, because meat is your biggest input and the cut customers notice if it shrinks. Behind it sits what the Bank calls “second-round effects”, the way a price rise works its way down the chain until the Tuesday special quietly costs more to plate than it did a few months back. Headline inflation has since ticked up to 4.5% in May, its highest since 2024.
There is one real piece of relief in the mix, and it’s worth naming. From 1 July, petrol came down by about R2 a litre and diesel by more than R3, after the oil price fell sharply from around $105 to $87 a barrel when the United States and Iran stepped back from confrontation (Moneyweb). Even with the temporary fuel-levy relief ending, the drop in oil more than covered it, and the rand firmed a little too. Cheaper diesel eases your deliveries, and cheaper petrol hands your customers a bit of room in their own budgets.
But fuel was never the whole story. Beef is still high, your imported stock and equipment are still dear on a soft rand, and the 7% repo rate is still doing what a rate hike is built to do: cooling spending. Eating out is among the first things people trim when money tightens, so your customers keep watching the bill in the same winter that always thins the tables. The Bank decides again on 23 July.
Why cutting back usually backfires
The instinct, when the room goes quiet and the invoices climb, is to make yourself cheaper. Smaller portions, a cheaper cut, money off the bill, a shift dropped on a slow Tuesday. In hospitality it’s especially tempting, because margins are thin and stock is perishable, so there’s no dip to buy and sit on. It also tends to cost more than it saves. Your regulars notice the first time, and you’ve taught the rest to expect less for less. Cheap is a race you can’t win against the chains and the delivery apps. Put the menu up instead, and you’ve pulled the one lever your regulars punish fastest.
The move that works is to get more generous, not cheaper
We’re wary of telling anyone how to run their kitchen, but after funding thousands of them through several winters, the operators who come through tend to do the opposite of cutting. They make themselves feel more generous, which isn’t the same as more expensive.
To a customer counting every rand, a special reads as a treat, and one built on something cheap reads as generosity while quietly improving your margin. A fountain drink costs you a few rand and turns a burger into an R89 meal that feels like a favour and earns you more per head than the burger alone. Better still, it gives you something to chalk on the board and post on a Tuesday morning. A special pulls new people in; a price rise only ever gives them a reason to pause. Same portions, same prices for your regulars, more reasons for someone new to choose you.
Timing helps too. Winter is the cheapest time to get ready for summer, and building ahead of the festive season beats scrambling in December behind everyone who left it late. Fund it with repayments that move with your turnover, easing through the quiet months rather than landing as a fixed bill on your worst Tuesday, and the season starts working for you instead of against you. (We happen to sell exactly that, so discount the observation as you like. The logic holds whoever the lender is.)
None of this makes June disappear. But the kitchens that treat a quiet winter as a chance to sharpen the offer, not shrink it, tend to walk into summer stronger than they left the last one. That part is in your hands.
Talk to someone who's seen more than ten of these winters.
Merchant Capital has funded South African kitchens through every one of them. If you want to think through how to carry the dip, we are here for the conversation.
To become a client, simply click here to get started.
This article is general information, not financial advice. Every business is different, so talk any decision through with your accountant or a qualified adviser before acting on it.
