{"id":862248,"date":"2026-06-02T13:30:00","date_gmt":"2026-06-02T11:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=862248"},"modified":"2026-06-02T13:41:15","modified_gmt":"2026-06-02T11:41:15","slug":"things-turn-sour-for-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/862248\/things-turn-sour-for-south-africa\/","title":{"rendered":"Things turn sour for South Africa"},"content":{"rendered":"\n

South African business sentiment weakened in the second quarter as consumers faced fresh pressures from the Iran war that\u2019s clouded the outlook for inflation and interest rates.<\/p>\n\n\n\n

The quarterly business confidence index compiled by FirstRand\u2019s Rand Merchant Bank and Stellenbosch University\u2019s Bureau for Economic Research dropped eight points to 39 in the three months through June.<\/p>\n\n\n\n

That\u2019s the weakest level since the third quarter of 2025, the data shows.<\/p>\n\n\n\n

While the decline in the reading was broad-based, it was largely dragged down by consumer-facing industries, the lender said.<\/p>\n\n\n\n

\u201cThe moderation comes against a shift in the global backdrop, as escalating Middle East tensions have driven higher oil prices and reshaped interest-rate expectations, prompting businesses to reassess the outlook,\u201d the lender said.<\/p>\n\n\n\n

South Africa\u2019s Reserve Bank last week raised borrowing costs by 25 basis points to 7% \u2014 the first hike in three years \u2014 as it flagged intensifying inflationary pressures. <\/p>\n\n\n\n

Policymakers also signalled that further monetary policy tightening will be warranted if the war drags on, while assuming that in the worst-case scenario, the policy rate would increase by at least a further 75 basis points by the third quarter of this year.<\/p>\n\n\n\n

Since the US and Israel attacked Iran on 28 February, oil prices have surged by a third, pushing domestic gasoline prices to a record high.<\/p>\n\n\n\n

\u201cBusinesses have had to adjust quickly to a less-supportive outlook, which weighed on sentiment across most sectors,\u201d said Isaah Mhlanga, chief economist at RMB. <\/p>\n\n\n\n

\u201cMany respondents indicated that uncertainty had increased and that clients had become more cautious about spending and investment decisions.\u201d<\/p>\n\n\n\n

Any improvement in sentiment will depend on geopolitical tensions easing, oil prices stabilising, and more certainty about the outlook for interest rates, he said.<\/p>\n\n\n\n

Interest rate pain is coming<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

South African central bank Governor Lesetja Kganyago promised that officials will lower the inflation rate back to its 3% target despite headwinds from the Iran war.<\/p>\n\n\n\n

\u201cLet there be no doubt, the South African Reserve Bank will be getting inflation back down to 3%,\u201d he said. \u201cI hope our history of delivering on our targets makes that promise convincing.\u201d<\/p>\n\n\n\n

The bank also signalled that further tightening may be warranted if the conflict drags on.<\/p>\n\n\n\n

\u201cBy raising rates, we hope to send a clear and credible signal that we will keep inflation under control,\u201d he said. <\/p>\n\n\n\n

\u201cI cannot tell you now if more will be needed, or how much. We take our decisions meeting by meeting. But the policy objective should be crystal clear.\u201d<\/p>\n\n\n\n

Inflation has drifted away from the central bank\u2019s 3% target since the war began, driven by a surge in energy prices, and is projected to reach 4.9% as early as the third quarter this year, according to the bank\u2019s latest forecasts.<\/p>\n\n\n\n

Policymakers also considered a 50-basis-point hike last week and reviewed three scenarios, all of which implied additional tightening.<\/p>\n\n\n\n

Locally, petrol prices are set to reach a\u00a0record high<\/a>\u00a0this month after the government rolled back some temporary relief measures that had cushioned consumers against fuel-cost increases sparked by the Iran conflict.<\/p>\n\n\n\n

The SARB adopted the 3% inflation goal last year, replacing a 3% to 6% range that had been in place since 2000. <\/p>\n\n\n\n

Kganyago said there was no question of the central bank reverting back to the wider target and said the shift to 3% had delivered clear benefits to South Africa through lower government borrowing costs. <\/p>\n\n\n\n

The country is in a better place now despite the Middle East conflict, he said.<\/p>\n\n\n\n

\u201cTarget reform has been one of the big wins for South Africa recently,\u201d he said. \u201cWe are not going to snatch defeat from the jaws of victory.\u201d<\/p>\n\n\n\n

By\u00a0Ntando Thukwana and Bonolo Mokonoto for Bloomberg<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

South African business sentiment weakened in the second quarter as consumers faced fresh pressures from the Iran war that\u2019s clouded the outlook for inflation and interest rates.<\/p>\n","protected":false},"author":59,"featured_media":788719,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[1889,2922,3619],"class_list":["post-862248","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-business-confidence","tag-interest-rates","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/862248","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=862248"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/862248\/revisions"}],"predecessor-version":[{"id":862251,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/862248\/revisions\/862251"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/788719"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=862248"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=862248"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=862248"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}