Business confidence was unchanged at the start of 2025, with sentiment across most sectors deteriorating despite resilient consumer-facing industries, according to the latest RMB/BER business confidence index (BCI).
“While a touch above the long-term average reading of 43 points, and well above the sentiment level recorded at the start of last year, it is worrying that four of the five sectors saw confidence slip relative to the fourth quarter of last year,” the compilers of the index said in a statement on Wednesday.
The flat reading follows three consecutive quarterly improvements, reflecting a fragile economic recovery that remains vulnerable in the face of weak domestic demand, global uncertainty and lingering structural challenges.
The index reading also signals a lack of conviction that recent gains will translate to sustained investment and growth.
“The business climate deteriorated, tying in with weak GDP growth, with only the Western Cape recording positive sentiment, although a drop to 52 from 55. Gauteng fell to 40 from 46, KwaZulu-Natal lifted from 40 to 44, but remained in negative territory,” Investec economist Annabel Bishop noted.
A reading of 45 means the majority of businesses are still pessimistic about prevailing conditions.
The star performer this quarter was new vehicle trade, where confidence soared by 29 points to 52 — its highest level in several years.
Analysts attributed the jump to a surge in sales volumes, supported by lower interest rates, early withdrawals from two-pot retirement savings, and pent-up consumer demand.
The retail sector held up well, with confidence easing slightly to 50 points after a strong festive season.
However, both sectors’ reliance on consumer resilience raises concerns about their sustainability, particularly in the face of potential tax increases and rising inflation, said RMB chief economist Isaah Mhlanga.
According to the RMB/BER statement, the boost due to withdrawals from the two-pot retirement savings will fade, while interest rates are unlikely to move much lower in an environment of an uptick in inflation.
The consumer-linked sectors still performed well in the first quarter, but the question is whether this momentum can be sustained in coming quarters
— Isaah Mhlanga, RMB chief economist
“The consumer-linked sectors still performed well in the first quarter, but the question is whether this momentum can be sustained in coming quarters or whether the more industry-linked sectors can take over the baton of growth,” Mhlanga said.
Manufacturing confidence slipped by two points to 34, dragged lower by weak local demand, though export demand held up surprisingly well.
Manufacturers also pulled back on investment, highlighting ongoing uncertainty over both policy direction and infrastructure reliability, particularly in the wake of steelmaker ArcelorMittal decision to close its long-steel operations.
Wholesale traders reported the biggest decline in confidence in the first quarter, with sentiment to 42 points from 60 amid slower sales and deteriorating business conditions.
Confidence among building contractors dipped to 45, but respondents expressed some optimism about future activity.
Business Day has previously reported how the sector continues to grapple with logistical bottlenecks, construction mafia disruptions, and high regulatory costs — structural issues that have dogged private sector investment for years.
The survey took place from February 5-24, with the bulk of responses received early in the survey period and before the delay in the tabling of the National Budget.
“This means that many responses were received just after US President Donald Trump announced that the US would cut all aid to SA,” the survey’s compilers said.
While that would have had little direct impact on the sectors surveyed, it signalled a further souring of already strained US-SA trade relations, they added.
“Indeed, these concerns featured in some of the comments from survey respondents, with references to worries about the impact of the continuation of Agoa [the African Growth and Opportunity Act].”
More geopolitical uncertainty could undermine confidence further, the statement reads.
Bishop referred to the compilers of the index explaining that the “duty-free access to the US provided by Agoa has benefited a number of sectors, particularly SA’s automobile industry.”
“Losing Agoa … could cost tens of thousands of jobs and dent the government’s economic growth strategy,” she said.
The US’s total goods trade with SA was $20.5bn in 2024, with imports in 2024 at $14.7bn, up 4.9% ($679.4m) from 2023. The duty-free access to the US provided by Agoa had benefited a number of sectors, Bishop said.
“Encouragingly, many respondents remain fairly optimistic about next quarter, but we need to see a real recovery in demand and activity, or firm action on the structural reform front, to underpin renewed confidence increases,” the statement reads.
Update: March 5 2025
The article has been updated with reaction.
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