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South Africa’s business confidence has continued its downward trend in the third quarter of 2025, with the latest figures from the RMB/BER Business Confidence Index (BCI) painting a picture of an economy still facing significant headwinds.
Following a sharp five-point drop in the second quarter, the index declined by a further point in Q3, bringing it to a level of 39. While the decrease may appear marginal, it places business confidence three points below the long-term average of 42, indicating that over 60% of survey respondents are dissatisfied with prevailing business conditions.
According to the Bureau for Economic Research (BER), the index reflects an economy that is managing to stay afloat but lacks the momentum needed for sustained growth. Most activity and demand indicators are tracking near 20-year average levels, underscoring the lack of urgency in investment and job creation.
“The current level of confidence is insufficient to drive an acceleration of much-needed investment to improve South Africa’s potential economic and employment growth rates,” the BER said in a statement.
Tariffs, Rates, and Sentiment
The survey for the third quarter was conducted between 6 and 25 August, coinciding with the imposition of 30% tariffs on many South African exports to the United States. The trade penalties, introduced by US President Donald Trump on 7 August after a lengthy pause, have heightened concerns about the country’s global competitiveness and trade relationships.
While the BER noted that several respondents referenced the new tariffs, it remains difficult to isolate their precise impact on production and trade. “Front-loading, cancellations, and production holidays in the automotive sector, for example, also affected activity during the period,” the BER added.
Despite these setbacks, there were some stabilising developments. Political tensions, which had escalated earlier in the year during the debate over the national budget, eased slightly. The Government of National Unity survived the turmoil, and the budget was eventually passed, allowing markets to regain a degree of composure.
Additionally, the South African Reserve Bank (SARB) cut its policy interest rate by 25 basis points in late July – its second cut this year. The move was welcomed by interest rate-sensitive sectors and provided a modest uplift to consumer and business sentiment. SARB also signalled its longer-term goal to shift the inflation target closer to 3%, potentially paving the way for further easing if inflation expectations fall.
However, consumer inflation ticked up slightly in July, ending a six-month streak of sub-3% readings. Still, it remains below the 4.5% average target for the year.
Confidence Diverges Across Sectors
Although the overall index reading appeared relatively flat, this masked significant movements within individual sectors. The BER noted that confidence levels in all five sectors surveyed shifted by 10 points or more – an unusual level of volatility that suggests growing uncertainty and sector-specific pressures.
The most notable recovery was in the new vehicle retail sector, where confidence surged by 12 points to cross into net positive territory (above 50) for the second time this year. Both gains occurred shortly after interest rate cuts, underscoring the sensitivity of vehicle sales to borrowing costs.
Building contractors also recorded a slight improvement in sentiment following a weak performance in Q2.
In contrast, confidence among manufacturers, retailers, and wholesalers declined sharply. Wholesalers, in particular, fell from a high of 50 points in the previous quarter to just 38, ending a run of five consecutive quarters above their long-term average of 45. The downturn was attributed to weak consumer goods sales and mounting competitive pressure from imported products.
Structural Issues Continue to Weigh Heavily
Beyond immediate market dynamics, many businesses remain burdened by longer-term structural challenges. Rising electricity costs, regulatory red tape, inefficiencies in logistics, and the impact of corruption remain major concerns.
Service delivery failures at the municipal level were also frequently mentioned by survey participants. The BER warned that these issues are likely to become more prominent in the public discourse as the country approaches local government elections next year.
Isaah Mhlanga, Chief Economist at RMB, placed the South African experience in a broader global context. He noted that many economies are currently navigating a transition into a more volatile global landscape shaped by political upheaval, trade realignments, and shifting monetary policies.
“Global market conditions are normalising into a new and difficult global world order,” Mhlanga said, adding that South Africa’s recent performance is not out of step with international trends, though its structural vulnerabilities make recovery more complex.