Sentiment in the business sector in South Africa has remained volatile despite a minor rebound following fears over US trade policy, including former President Trump’s threat to impose 30% tariffs.
The latest release of the Business Confidence Index (BCI) by the South African Chamber of Commerce and Industry (Sacci) has revealed a complicated landscape for businesses, as the index experienced a notable fluctuation in recent months.
The BCI dropped by 8.6 index points in April to a measure of 114.9, before recovering slightly by 0.9 index points in May, culminating in a score of 115.8.
Waldo Krugell, economics professor at North-West University, said that this decline was in line with other high-frequency data indicators.
“Basically, it’s businesses that are now more pessimistic about the prospects for doing business during the course of this year,” Krugell said.
“This loss of momentum speaks to consumers not spending as much as expected. Even in the investment numbers last week we saw a decline in investment indicating people are less confident and expect a slowing of the economy.”
Despite this minor rebound, Sacci highlighted that the BCI still stands 8.0 index points higher than the same period last year, signalling a year-on-year improvement in business confidence.
In its analysis, Sacci noted that the volatility between April and May was characterised by mixed performances across the index’s 14 sub-indices, where six improved, six declined, and two remained neutral.
Factors contributing positively to sentiment include a strengthened rand exchange rate, surging share prices on the Johannesburg Stock Exchange (JSE), and high prices for key commodities like gold and platinum.
Year-on-year comparisons show a brighter outlook, with the BCI being 6 and 8 index points above the levels recorded in April and May of the previous year respectively.
Contributing to this optimistic trend are increased numbers of inbound tourists, a rise in new vehicle sales, lower inflation, and elevated global prices for precious metals.
Nevertheless, fluctuating merchandise export volumes and the diminishing real value of building plans continue to cast shadows on the business climate.
Sacci emphasised the need for substantive economic growth to enhance the well-being of South Africans.
The Chamber pointed out the disconcerting reality that the country’s performance of merely 0.8% year-on-year growth reported for the first quarter of 2025 falls significantly short of what is necessary to tackle escalating unemployment and foster an inclusive economic environment.
Programmes to attract investment must be prioritised to combat concerns that deter foreign and domestic investors.
North-West University Business School economist, Professor Raymond Parsons, said if taken together with other high-frequency economic data, the BCI showed a mixed picture of the current business mood.
“Obviously global factors also play a role. But as Sacci itself emphasises, the domestic policy environment must become more conducive to boosting investor confidence,” Parsons said.
“This means South Africa needs to improve on the present consensus forecasts of only about 1% GDP growth in 2025. Translating positive short-term business confidence trends into longer-term investor confidence is therefore the challenge presently facing South African policymakers at various levels.”
Efficient Group chief economist Dawie Roodt said that part of a reason why business confidence was better than a year ago was due to the political uncertainty last year.
“We are still on a high due to the Government of National Unity. Recently we also have seen a stronger Rand and increase in the gold price also contributed to this,” Roodt said.
“However, this is still not good enough. We need higher levels of business confidence before we can talk about much stronger economic growth. The Sacci BCI corresponds with weak economic growth of 1% or less than 1% now expected for 2025.”
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