Business confidence in South Africa improved in the third quarter of 2024, according to the RMB/BER Business Confidence Index (BCI), but cautious optimism prevails as consumers remain under pressure on numerous fronts.
Following the five-point increase reported in the second quarter of 2024, the Business Confidence Index rose by another three points to reach 38 in the third quarter. This boosted the BCI to its highest level since the fourth quarter of 2022, but regardless, less than four out of every 10 respondents were satisfied with the prevailing business conditions in the country.
This was the first BCI survey conducted since the formation of the government of national unity (GNU). According to RMB, it reflects cautious optimism as a result of greater political certainty and the continued absence of load shedding.
However, economic activity remained sluggish as continued financial pressure on consumers and weak demand from export markets continued to weigh on business sentiment. South Africa’s GDP grew by just 0.4% in the second quarter, according to data released by Statistics South Africa (StatsSA).
“Fortunately, the widely anticipated interest rate cut in South Africa later this month, on the back of lower consumer inflation and a boost from the introduction of the two-pot retirement system should spur domestic demand through the remainder of the year,” said RMB’s chief economist Isaah Mhlanga.
“This should benefit sentiment, but logistical constraints remain top of mind and will need to be urgently tackled to support a sustained lift in business confidence.”
Auto industry optimism, manufacturing flat
Among the various sectors, new vehicle dealers registered the biggest increase in confidence in the third quarter, rising 17 points to 27, but despite this, the sector remains the most pessimistic, with less than a third of respondents indicating that they were satisfied with prevailing business conditions.
South African new vehicle sales saw a 4.9% year-on-year decline in August as high interest rates continued to weigh down on consumers.
Conversely, the wholesale trade sector remained the most optimistic, with 51% of respondents being satisfied with prevailing conditions, although the sector did see a two point drop in the BCI versus the second quarter.
Confidence levels in the manufacturing sector remained unchanged in the third quarter, at 28 index points, however, the sector did see a decline in production due to lower domestic and export demand.
Retail trader confidence improved from its long-term average of 39 index points to an above-average 45 in the third quarter, although actual sales volumes could be lower year-on-year, RMB warns.
There was a notable downturn in business confidence among building contractors, with the index falling by six points to 41, following a five-point increase in the second quarter.
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