Nedbank Retail Services has warned that franchise businesses in South Africa will likely come under immense pressure after the US imposes its 30% tariff on the country.

This could be especially painful for US brands like McDonald?s, Burger King and Starbucks, which rely on speciality imports from the United States to maintain brand and quality consistency.

Not only might these franchises have to handle costly imports, but they could end up paying higher royalties and limit expansion as a result.

However, this could also result in opportunities for local franchises and industries as the sector pivots to sourcing locally.

US President Donald Trump signed an executive order on Thursday (31 July), setting punitive import tariffs on a host of countries, including a 30% tariff for South Africa.

The tariffs are set to come into effect seven days after the signing, which gives and effective date from Thursday, 7 August.

While it has been reported for months?at least since April 2025?that key export industries like the automotive sector and agriculture would be hit hard by the tariffs, the wider impact on local consumers has been less apparent.

However, Nedbank has warned that the retail sector ? particularly franchising ? may also face consequences.

?US-based franchises operating in South Africa may struggle to keep pricing competitive if they import branded or speciality items,? said Karen Keylock, National Manager for Retail Services at Nedbank Commercial Banking.

While the 30% tariff on South Africa is carried by US importers, so are other tariffs imposed by the Trump administration on other countries.

That means any items South African franchisees need to import from US that are affected by the tariffs (such as branded items made in China, or ingredients sourced from other markets), will carry those higher costs as well.

?This may force franchise owners to source locally, which may involve compromises on brand consistency or increased lead times.?

The tariffs won?t only potentially affect current operations, Keylock said, but could impact expansion plans for these kinds of businesses as well.

Tariff uncertainty may cause US franchisors to delay new entries or scale back expansion plans to South Africa, she said.

Notably, the slowdown of South African exports to the US will hurt certain sectors, which would likely weaken the rand, reduce disposal income and, thus, dampen local consumer spending.

?This is bad news for the whole retail sector, but particularly franchising, which relies on strong middle-class spending power,? Keylock said.

As a result, franchise fees and royalties paid in US dollars will become more expensive in a weaker rand environment.

Keylock warned that the impact of the tariffs won?t be limited to just US brands operating in South Africa, but could impact entire supply chains for various franchises.

?We may see franchise brands rerouting their supply chains, either sourcing from countries with favourable trade agreements or investing in in?market production in South Africa,? she said.

However, as with most negative turns, the situation does present some opportunities.

The Nedbank executive said that local franchises, such as Nando?s Chicken Licken and Steers/Debonairs, could benefit and gain market share at the expense of US brand imports.

International brands might also pivot to manufacturing or sourcing products within South Africa to avoid high costs which, in turn, would boost local suppliers.

?In our experience, South African and international businesses are resilient,? Keylock said.

She noted that the bank?s business clients have already been exploring and adapting long-term plans to ensure business survival, particularly around supply chains and reducing trade barriers.

This stands in stark contrast to the South African government?s ?package of interventions?, which is currently still being developed and is, at present, scant on details and lacks any short-term solutions.

Keylock said ongoing negotiations with the United States will be crucial to protecting long-term business operations across sectors.

However, the reality is that the negotiations have already failed, and that businesses and consumers need to get ready for possible disruptions back home. (BUSINESSTECH)

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