SA business confidence rebounds sharply in final quarter

Business confidence in South Africa improved in the final quarter of 2025, rebounding after two consecutive declines, as easing inflation, stable politics and improving global sentiment helped lift conditions across most sectors.

The business confidence index (BCI) rose by five points to 44 in the fourth quarter — three points above its long-term average — according to a survey by RMB and compiled by the Bureau of Economic Research (BER). This means 44% of survey respondents were satisfied with prevailing business conditions, up from 39% in the previous quarter.

According to the statement, “the results suggest that the economy is regaining some momentum after remaining subdued in the middle of the year”.

This is in line with Tuesday’s GDP data, which showed that the economy expanded by 0.5% quarter-on-quarter (seasonally adjusted).

“The key positive is that the improvement is broad-based. Even among building contractors, the only sector to dip this quarter, sentiment remains close to its long-term average,” said RMB chief economist Isaah Mhlanga. “While this is not a step-change, it is a meaningful turn in the right direction.”

The BCI survey coincided with several positive developments, including South Africa’s removal from the Financial Action Task Force (FATF) greylist, an S&P Global credit ratings upgrade, a well-received medium-term budget policy statement, and a stable rand and supportive interest rate environment, despite a slight uptick in inflation during the period.

These developments helped support a more constructive mood among business leaders, especially in sectors sensitive to financing conditions.

Another encouraging finding was that both purchasing and selling price inflation slowed, potentially entrenching the Reserve Bank’s lower inflation target of 3% sooner than expected.

The standout performer in the fourth quarter was manufacturing, where confidence surged by 16 points to 39, its highest level since 2022, following three consecutive quarters of decline. While production volumes did not rise in tandem with sentiment, fixed investment indicators showed modest improvement, a potentially positive signal for longer-term growth.

It is too early to celebrate. We need to see this tentative improvement being sustained for a couple of quarters.
— Isaah Mhlanga, RMB chief economist

Retail sentiment also posted a strong rebound, rising 11 points to 43, after an unexpectedly weak third quarter. The rise brought confidence in line with averages recorded since Covid-19. Sales volumes held up well relative to a strong festive season last year, suggesting underlying consumer resilience.

Confidence among wholesalers rose by four points to 42, supported by stronger sales of non-consumer goods such as machinery, equipment, and industrial supplies — items typically used by businesses rather than households. However, the stagnation in consumer goods sales (food, toiletries, clothing, household items and so on) may foreshadow a moderation in retail activity heading into 2026.

New-vehicle dealers remained the most confident group, with sentiment increasing by four points to 58. The sector continued to benefit from a policy rate cut to 6.75% late in the quarter.

The only sector to record a decline was building contractors, where confidence slipped by seven points to 39. However, the underlying data showed a rise in actual activity, suggesting the sector’s recovery remains on track despite lower sentiment. “The broader building sector continues to perform well,” BER and RMB noted in a joint release.

Despite the fourth-quarter bounce, Mhlanga cautioned against overoptimism. “It is too early to celebrate. We need to see this tentative improvement being sustained for a couple of quarters,” he said.

The BER and RMB added that structural reform progress remains crucial to translate improved demand into faster production, capital spending and, ultimately, job creation.

“There are significant policy risk events in the next few years, both locally and globally, which could keep business people on edge … Looking ahead, it will be important to see if manufacturing output catches up with sentiment, if retail spending maintains momentum in 2026, and building contractors bounce back from this quarter’s dip,” the BER and RMB said.