Business confidence in South Africa dipped slightly in September 2024, reflecting growing economic uncertainties despite improvements in tourism, exports, and inflation. According to the South African Chamber of Commerce and Industry (SACCI), the Business Confidence Index (BCI) dropped by 1.3 points to 110.2 from 111.5 in August, erasing cumulative gains made since May.
Signs of Hesitation in a Fragile Recovery
SACCI noted that the marginal decline in business confidence highlights the fragility of South Africa’s economic recovery. Though the economy has shown positive signs since June, the latest dip signals persistent uncertainty, partly attributed to inconsistencies within the government of national unity.
“The hesitation in business sentiment reflects unresolved challenges in the ‘memorandum of understanding’ between coalition partners in the new administration,” the report stated.
BCI Trends for 2024
| Month | BCI Score | Change |
|---|---|---|
| August | 111.5 | +3.7 points (since May) |
| September | 110.2 | -1.3 points |
The report also noted that despite the fluctuations, business confidence has improved on an annual basis. The index for the first nine months of 2024 averaged 110.9, up from 109.2 in the same period last year, showing a 1.7-point increase year-over-year.
Key Factors Impacting Confidence
The SACCI report highlighted mixed signals in the business environment. While tourism, exports, and manufacturing output contributed to positive sentiment, weak retail sales, fewer new vehicle sales, and reduced building activity weighed on business confidence.
Positive Contributors:
- Tourism: Increased overseas tourist arrivals
- Exports: Higher merchandise export volumes
- Inflation: Lower inflation, falling to 4.4% in August
- Manufacturing: Improvement in manufacturing output
Negative Contributors:
- Retail Sales: Struggling sales volumes
- New Vehicle Sales: Fewer cars sold in the market
- Construction: Decreased real value of approved building plans
Municipal Performance: A Growing Concern
SACCI also raised alarms about the poor performance of local municipalities, with only 30 of the 257 municipalities rated as stable. The report highlighted that 66 municipalities are officially dysfunctional, with 161 more at risk of collapse due to poor financial management and service delivery issues.
“Real fixed investment in these areas is crucial. Reversing the further decline of municipalities must be an urgent priority,” SACCI warned.
Municipal Performance Snapshot:
| Status | Number of Municipalities |
|---|---|
| Stable | 30 |
| At Risk of Failure | 161 |
| Dysfunctional | 66 |
Municipal instability poses a significant challenge to sustaining economic recovery and attracting investment.
Economic Forecast: Modest Growth Ahead
While inflation has improved, with the rate dropping to 4.4% in August, South Africa’s economic growth remains sluggish. The South African Reserve Bank’s decision to lower interest rates to 8%—the first cut in over four years—offered some relief, but growth projections remain modest.
The economy grew by just 0.4% year-on-year during the first half of 2024, with a target of 1.5% growth in the second half required to achieve 1% real GDP growth for the year. However, SACCI warned that structural challenges could limit growth to just 1.2% annually over the next five years if unresolved.
“Economic growth will only be sustainable if government partners adhere to agreements and address underlying structural barriers,” SACCI emphasized.
Bright Spot: eThekwini Business Confidence Surges
In a contrasting development, eThekwini municipality reported a significant boost in business confidence during the third quarter of 2024. The local business confidence index rose to 63.01 from 55.49 in the previous quarter, driven by uninterrupted electricity supply, lower inflation, and reduced fuel prices following a stronger rand and falling crude oil prices.
eThekwini Business Confidence Highlights:
- Q3 Confidence Score: 63.01
- Q2 Confidence Score: 55.49
- Key Drivers: Lower fuel prices, uninterrupted power supply, and interest rate cuts
This upward trend in eThekwini reflects how localized improvements can foster better business conditions, even as national-level challenges persist.
Conclusion: Uncertainty Clouds Future Outlook
The recent dip in South Africa’s business confidence underscores the delicate balance the economy faces. While lower inflation, increased exports, and tourism are providing some relief, unresolved political and structural challenges continue to weigh on confidence. SACCI emphasized that without stronger coordination among government partners and improvements in municipal performance, both business and investor sentiment could dwindle further, limiting the country’s economic potential in the coming years.
