New Research Reveals Fourth Quarter Business Confidence in South Africa Takes a Hit

On March 17, 2023, a customer was seen comparing prices while shopping at a Pick and Pay shop in East London, South Africa. This image was captured by REUTERS/Siphiwe Sibeko/File Photo.

A recent Reuters report on November 21, 2023, stated that South Africa’s business confidence decreased in the fourth quarter due to weak local demand for vehicles and high borrowing costs putting pressure on consumer incomes. The data showed that the business confidence index fell to 31 points in the fourth quarter from 33 points in the previous three months. This information was part of a survey by the Rand Merchant Bank (RMB) and compiled by the Bureau for Economic Research. Confidence among new vehicle dealers also dropped 24 points, marking the lowest level since the second quarter of 2020 when South Africa imposed its strictest COVID-19 lockdown.

The rise of borrowing costs has curbed consumer spending while businesses struggle to pass on higher input costs to buyers. Respondents on the survey cited logistical challenges such as delays at harbors and dealing with potholes, as well as difficulties receiving timely payments for delivered goods. However, there was a positive aspect to this news: there was a 15-point jump in confidence among retailers who have been struggling with high operating costs due to power cuts. Despite cost pressures slightly easing, non-durable retailers reported a steep decline in volumes due to price increases late last year according to the survey.

Isaah Mhlanga, chief economist and head of research at RMB, said that structural supply constraints around infrastructure and electricity remain key challenges for operating in South Africa’s business environment. However, he added that “the decline in the RMB/BER Business Confidence Index also reflects underlying demand weakness.”