South African Business Mood Plunges to Lowest Level Since 2021 Riots

The South African business confidence index (BCI) has plummeted to its lowest level since the 2021 riots, reflecting a deepening pessimism among businesses. The RMB/BER BCI fell to 30 in Q1 2024, signaling a growing unease among businesses, particularly in the retail and manufacturing sectors, which experienced steep declines in confidence due to poor demand (RMB/BER, Q1 2024). This decline in business confidence comes amidst a backdrop of economic uncertainty, high borrowing costs, and logistical constraints, which have been persistent challenges for South African businesses.



The formation of a coalition government and the sustainability of energy availability factor (EAF) improvements have led to uncertainty about the business operating environment and policy implications, further contributing to the decline in business confidence (RMB/BER, Q2 2024). High borrowing costs and subdued consumer demand have also negatively impacted businesses, particularly in the automotive sector, which has seen a significant decline in confidence (RMB/BER, Q2 2024).

Supply constraints, including logistical challenges, infrastructure issues, and electricity constraints, have been persistent obstacles for businesses, contributing to the overall decline in business confidence (RMB/BER, Q4 2023). Underlying demand weakness has also played a role in the decline, as businesses face challenges passing on elevated input costs to customers (RMB/BER, Q4 2023).

The South African economy has been grappling with slow economic growth, with data showing that economic growth for the third quarter of 2024 stalled at around 0.3%, and the primary sector (agriculture and mining) real output contracting by 4.6% in the first nine months of 2024 (Sacci, November 2024). This slow economic growth, coupled with the decline in business confidence, underscores the need for a comprehensive effort by responsible role players to collaborate and address the underlying challenges facing the South African economy.

In conclusion, the decline in South African business confidence reflects the persistent challenges faced by businesses, including economic uncertainty, high borrowing costs, logistical constraints, and underlying demand weakness. Addressing these challenges will require a collaborative effort by both the public and private sectors to stimulate economic growth, improve business sentiment, and create jobs. The South African economy faces a critical juncture, and the translation of business confidence into investor confidence, economic growth, and job creation will be key to marking the ultimate success.