Business Confidence Rises as Economy Shows Signs of Life

South Africa’s business community is ending the year on a far more optimistic note, with new data showing a broad rebound in sentiment across most major sectors.

The latest RMB/BER Business Confidence Index (BCI) for the fourth quarter of 2025 shows confidence rising by five points to 44, marking a notable shift after two subdued quarters and placing the index slightly above its long-term average.

Economists describe the improvement as a welcome sign that the economy may be regaining momentum after a difficult mid-year period. The survey, conducted in November, captured a moment when several macroeconomic developments appeared to break in the country’s favour. Firms expressed renewed optimism despite ongoing structural challenges, signalling that business conditions may be stabilising.

Five of the six major sectors measured in the index recorded higher confidence levels. Manufacturing posted the standout performance, with sentiment surging by 16 points to 39 – its strongest showing in three years. While manufacturers caution that actual production has yet to accelerate meaningfully, early signs of firmer demand and modest improvements in investment planning contributed to the positive shift.

Retailers also reported a sharp improvement in sentiment. Confidence jumped by 11 points to 43, supported by steady sales heading into the festive period and indications that consumers were marginally better positioned than a year earlier. Wholesalers, new vehicle dealers, and other trade-sensitive businesses also recorded modest gains.

Building contractors were the only group to show a decline, although even in that sector confidence remains close to long-term norms and is far from the deep lows experienced in previous cycles.

The improved mood coincided with several developments favourable to the broader economy. South Africa’s removal from the Financial Action Task Force grey list and a recent credit-rating upgrade contributed to a more positive investment environment. The rand remained relatively stable during the survey period and benefited from an improving global risk climate. In addition, the South African Reserve Bank trimmed interest rates by 25 basis points to 6.75%, a move expected to support interest-rate-sensitive sectors such as retail and vehicle sales.

GDP figures for the third quarter showed the economy expanding for the fourth consecutive quarter, a run that helped reinforce the sense that the recovery, although modest, is gaining traction.

Despite the better numbers, economists warn against reading too much into a single quarter’s surge in confidence. Many firms remain wary of high operating costs, unreliable energy supply, policy uncertainty, and global economic headwinds. Manufacturing output, while sentiment has improved, continues to lag behind expectations, and fixed investment is yet to show a decisive turnaround.

Construction, often a bellwether for long-term economic confidence, remains under pressure as public-sector infrastructure spending and private-sector building activity continue to lag.

Overall, analysts describe the rebound as “cautious optimism” rather than a signal that structural challenges have been overcome. Confidence needs to rise above the 50-point mark before it can be described as a strong business cycle turning point.

If the improvement in sentiment is sustained through early 2026, it could lay the groundwork for a more durable recovery in private-sector investment. Higher confidence historically precedes stronger investment in machinery, buildings, and expansion projects, all of which are essential for raising the country’s long-stagnant growth rate.

Manufacturing’s large confidence swing is particularly important. Even if production has not yet responded, the sector’s improved outlook hints at stronger orders and potentially rising exports if global conditions hold steady. Retail and wholesale confidence also matter, as they reflect the health of household demand — a key pillar of the South African economy.

Economists emphasise that the confidence rebound must be matched by concrete policy stability, improved logistics performance, and steady progress in energy reform. Without these, any gains could prove temporary.

For now, however, the latest BCI reading offers something South Africa’s economy has lacked for much of the past decade: a broad-based improvement in business sentiment and a hint that the cycle may be turning in the right direction.