Businesses in South Africa are worried

The latest Business Confidence Index in South Africa shows that sentiment among companies in the country is flat, with most still generally pessimistic about operating conditions.

The RMB/BER Business Confidence Index (BCI) was recorded at 45 in the first quarter of the year, five points below the ‘neutral’ mark at 50.

While this is higher than the same time last year, and just above the long-term trend for South Africa, the Bureau for Economic Research (BER) said it was a worrying sign.

This is specifically because four of the five sectors tracked saw confidence slip relative to the fourth quarter of 2024, and a slight majority of respondents across sectors are pessimistic about current business conditions in South Africa.

The only reason the index remained stable was a huge lift in sentiment around new vehicle sales, which saw its subindex jump from 23 to 52.

The survey was conducted from 5 to 24 February, with the bulk of responses received early in the period.

The BER said this means that many responses were received just after US President Donald Trump announced that the US would cut all aid to South Africa.

This reflects the uncertainty and turbulent international relations snafu at the time. This turbulence has not subsided.

“While this would have had little direct impact on the sectors surveyed, it signals a further souring of already strained US-SA trade relations,” the BER said.

“Indeed, these concerns featured in some of the comments from survey respondents, with references to worries about the impact of the continuation of AGOA.”

Since then, South Africa’s trade relations with the US have soured further, with President Cyril Ramaphosa penning an article in late February criticising Trump and US ally Israel over the ongoing war in the region.

Trump responded by cutting aid to South Africa.

Several economists and business leaders have warned that AGOA is next in line, with many expecting South Africa to be booted from the programme.

Despite mitigation efforts, this will have serious economic consequences for South Africa.

The government is said to be working on new bilateral trade agreements and sending diplomats to the States to iron out conflicting views.

However, losing preferential access to the United States will hit hard, regardless.

South Africa has its own problems

While the current geopolitical landscape is filled with uncertainty and impacting sentiment, the BER noted that not all concerns are global.

Respondents in the building and manufacturing sector, in particular, were worried about ArcelorMittal’s potential closure and domestic demand in general.

The majority of responses were also received before the delay in the tabling of the National Budget, which was delayed to 12 March.

The country also had to contend with the return of stage 6 load shedding during this time.

Isaah Mhlanga, chief economist at RMB, warned that some of the survey results could be seen as “flickering warning lights.”

In fact, without the sharp improvement in new vehicle dealers’ confidence, the BCI would have declined at the start of the year, the group noted.

Mhlanga said that consumer-linked sectors still performed well in the first quarter, but the question is remains whether this can be sustained in coming quarters or whether the more industry-linked sectors
can take over the baton of growth.

The boost due to withdrawals from the two-pot retirement savings will fade, while interest rates are unlikely to move much further down the current environment.

Possible tax increases could also burden consumers further, he warned.

Despite the worries, the BER noted that respondents were more optimistic about the second quarter—but with the caveat that geopolitical uncertainty could undermine confidence further.

“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 group said.