The RMB/BER Business Confidence Index (BCI) fell by five points to 40 in the second quarter of 2025, reflecting pessimism about trading conditions amid a loss of economic momentum in South Africa .
The decline follows a stalled recovery from the first half of 2024, with only 40% of respondents in cyclically sensitive sectors expressing satisfaction with business conditions.
The data comes a day after Statistics SA said South Africa’s gross domestic product increased by 0.1% in the first quarter of 2025, down from the increase of 0.4% in the fourth quarter of 2024.
The survey, conducted from May 7 to May 26, 2025, highlighted global trade uncertainties, strained US-South Africa diplomatic relations, and local logistical challenges as key drags on sentiment.
“The majority of the respondents are thus pessimistic about trading conditions. While remaining above the average of 2023 and 2024, confidence is now a touch below the long-term average level,” it said.
The rand’s volatility, peaking past R19.90 to the dollar in April before recovering to below R18 to the dollar, added to the unease. While the scrapping of a proposed VAT hike provided some relief, mixed signals about the stability of the Government of National Unity and the Democratic Alliance’s role in it further clouded the outlook, RMB said.
The second quarter confidence print was driven by declines in four of the five sectors, partially offset by a sharp increase in wholesale trade confidence, leaving overall confidence lower. This almost mirrored the previous quarter outcome, where declines in four of the five sectors were more than fully offset by a sharp increase in new vehicle dealer confidence, resulting in overall confidence rising.
Sectoral Performance
- Wholesale Trade: The only sector to report higher confidence, rising to 50 points. Non-consumer goods traders performed strongly, but consumer goods traders saw a sharp drop in sales, raising concerns about weakening consumer demand despite supportive factors like low inflation, interest rate cuts, and two-pot pension payouts.
- Retail and Motor Trade: Both sectors saw confidence decline to 42 points, down 8 and 10 points, respectively. Retail and motor trade respondents remained relatively optimistic about sales volumes, supported by a 25-basis-point interest rate cut post-survey, though higher personal taxes may offset this boost.
- Building Contractors: Confidence dropped 10 points to a near three-year low of 35. Residential contractors faced ongoing pressure despite prior rate cuts, while non-residential contractors performed better but could not prevent the overall decline.
- Manufacturing: Confidence held steady at a low 33 points despite worsening conditions, with declines in domestic and export demand driving lower production. Political climate concerns also intensified.
RMB said that last quarter’s warning lights are “certainly flickering brighter”.
“The fact that confidence in four of the five sub-sectors declined and that (for two consecutive quarters) confidence in three of the five sub-sectors declined suggests that momentum in overall economic activity slowed down. During this period, just two sectors–wholesalers and new vehicle dealers–alternated to do the heavy lifting, but it was insufficient to lift confidence this quarter,” it said.
RMB said following the meagre 0.1% quarter on quarter GDP growth rate recorded in the first quarter of 2025, “we cannot risk losing any further momentum.”
It said the reduction in the repo rate will provide some relief, but more is needed to reignite the spark in the South African economy.
“There is arguably more certainty on the local political front, with Budget 3.0 tabled and broad agreement among GNU partners to continue working together for now. The global environment will remain uncertain, but an easing of tension regarding diplomatic relations between the US and South Africa would support sentiment,” it said.
Kristof Kruger, senior Fixed Income Trader at Prescient Securities, said the overall growth trajectory for 2025 remains subdued. South Africa’s economic fundamentals continue to face several headwinds, including:
- Structural issues like energy shortages and high unemployment,
- Global trade uncertainty and slow growth in key trading partners,
- Domestic policy challenges and a lack of political cohesion within the government.
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