Business confidence dipped again in the third quarter as weakening sentiment across key sectors pointed to an economy struggling to gain traction amid global trade uncertainty, rising costs and persistent structural challenges.
All these were against the backdrop of new US tariffs on SA exports.
The latest RMB/BER business confidence index (BCI) edged down one point to 39, after a five-point fall in the second quarter. The reading is now below the long-term average of 42, implying that more than 60% of businesses remain dissatisfied with current conditions.
However, Isaah Mhlanga, chief economist at RMB, said the SA business confidence experience in recent quarters was not out of line with that in other economies.
“Last year brought significant political and economic policy changes in many countries, including SA, and after initial excitement, or in some cases, disappointment, conditions are normalising into a difficult emerging global world order.”
While the composite index appeared relatively flat, the BCI masked sharp movements across all sectors, with each registering shifts of 10 points or more — an unusually volatile outcome.
The standout performer this quarter was the new vehicle trade, where confidence rose by 12 points to 54, marking the second reading above 50 this year. The sector benefited from recent interest rate cuts and strong sales, though the report cautioned that volume growth is likely to have peaked, with demand now skewing towards lower-priced vehicles.
Building contractors also saw a recovery, with sentiment rebounding by 11 points to 46, helped by improving indicators in the residential and nonresidential segments.
But elsewhere confidence deteriorated. Retail confidence plunged by 10 points to 32 as business conditions weakened across much of the sector. Furniture retail emerged as a rare bright spot.
🔀 Sector Breakdown: Highly Volatile
Wholesale confidence fell by 12 points to 38, ending a five-quarter run of strong performance. The sector struggled particularly in consumer goods.
Manufacturers, typically the least optimistic group, posted the lowest reading at 23, a 10-point drop. While several operational indicators improved, global trade uncertainty and local production headwinds weighed heavily on sentiment.
“The business climate deteriorated, tying in with the above readings, as businesses said their activity worsened — notably in selling prices, purchasing prices, employment and inventories,” said Investec chief economist Annabel Bishop.
The survey, conducted in August 6-25, coincided with the start of 30% tariffs on many SA exports to the US, after the country failed to secure a renewed trade deal.
“SA has effectively lost its Agoa benefits as expected, with only some metals and minerals escaping the protectionism,” Bishop added.
Agricultural and automotive exports are especially affected.
The report notes that it is difficult to isolate the full effect of the US tariffs in the survey, but some respondents flagged disruptions including production holidays, order cancellations, and front-loading of exports in anticipation of trade barriers.
According to the report, the negative impact on GDP is expected to be modest, depending on how the government responds. “These survey results do not indicate a meaningful acceleration in the third quarter.”
“The negative effect on GDP growth is likely to be between minus 0.1% and minus 0.2%, depending on the mitigating strategies put in place by the government,” Bishop said.
According to Oxford Economics senior economist Jee-A van der Linde the decline in business sentiment suggests dismal private sector investment heading into the second half of the year.
“The survey findings suggest that domestic business activity is largely stagnating rather than accelerating, which means economic activity is not expected to pick up strongly in the near term,” he said.
Mhlanga warned that SA’s “muddle-through” growth pattern was unlikely to generate meaningful job creation or investment without accelerated economic reforms, “including speeding up economic reforms in the logistics, water and local government sectors, alongside coherent messaging across public and private sectors”.
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