South Africa’s Business Confidence Takes a Hit in Fourth Quarter, According to Survey

Due to weak local demand for vehicles and high borrowing costs, South Africa’s business confidence fell in the fourth quarter of 2023. The Rand Merchant Bank (RMB) and the Bureau for Economic Research survey found that the business confidence index dropped from 33 points to 31 points. New vehicle dealers, who are facing high inventory levels, reported a significant drop in confidence with a fall of 24 points.

Businesses operating in Africa’s third-largest economy are struggling to pass on higher input costs to buyers due to rising borrowing costs, while consumers are also cutting back on spending. Respondents in the survey highlighted logistical challenges such as delays at harbors and potholes, as well as difficulties in receiving timely payments for delivered goods. Despite this, there was an increase of 15 points in confidence among respondents in the retail sector, which has been facing high operating costs due to power cuts.

Cost pressures have eased slightly but non-durable retailers reported a sharp decline in volumes due to recent price increases. Structural supply constraints around infrastructure and electricity remain a key challenge in the South African business environment. According to Isaah Mhlanga, chief economist and head of research at RMB, the decline in the RMB/BER Business Confidence Index reflects underlying demand weakness.