The Business Confidence Index (BCI) by financial services firm RMB and economic research organisation the Bureau for Economic Research rose by three points to 47 in the first quarter, building on the improvement recorded in the fourth quarter of 2025.

The BCI now stands six points above its long-term average and 20 points above the post-Covid-19 low reached in second quarter of 2023. Barring the post-Covid-19 recovery, this is the highest confidence reading since 2015, the report says.

It remains below the neutral 50point mark, with zero showing an extreme lack of confidence and 100 indicating extreme confidence.

“The further increase in the composite RMB/BER BCI is encouraging. Sustained improvements in confidence are needed to kick-start fixed investment, and the current above-average level suggests we may well see a rebound in capital expenditure during 2026,” said RMB chief economist Isaah Mhlanga.

“However, there is a risk that the recovery is becoming less balanced.

“Manufacturers are particularly sensitive to overall demand dynamics and their subdued confidence suggests that improved sentiment elsewhere has not yet translated into stronger domestic demand, although the forward-looking indicators point to some improvement,” says Mhlanga.

Official high-frequency data points to a loss of momentum in the production side of the economy during the fourth quarter of 2025. This is somewhat unexpected, given the more positive underlying activity data from survey results during this period.

The extent of this possible slowdown will be clarified by Statistics South Africa’s release of GDP figures for the fourth quarter of 2025 next week.

The GDP figures will confirm whether the improvement in the BCI over the past two quarters is translating into faster growth, despite evidence from high-frequency indicators that suggests growth may have struggled over this period, he says.

Meanwhile, the rand is 7% stronger against the dollar relative to the fourth quarter of 2025, which is positive from a cost perspective, although this weighs somewhat on export competitiveness.

Additionally, the repo rate remains 100 basis points (bps) below its level a year ago, and the ten-year government bond yield has declined by 70 basis points since the fourth quarter of 2025 BCI, but is about 200 basis points lower relative to a year ago.

However, during the period, geopolitical tensions intensified amid concerns about a potential escalation of conflict between Israel and the US, and Iran.

The water crisis in Gauteng also worsened, Limpopo and Mpumalanga were affected by flooding, and the foot-and-mouth disease outbreak persisted.

Many respondents also continue to flag operational challenges at local ports, while concerns about cheap imports are increasingly being raised.

“A sustained improvement in confidence will ultimately depend on stronger demand, continued policy credibility and progress on structural reforms. For now, sentiment is improving but translating that into durable growth remains the key test for 2026,” says Mhlanga.

SECTOR READINGS
The improvement in the composite index was not broad-based, despite market sentiment being generally positive, he notes.

Confidence among manufacturers and retailers declined, after encouraging gains in the prior quarter.

However, solid increases among new vehicle dealers, wholesalers and building contractors more than offset these declines, leaving the overall index higher, both quarter-on-quarter and year-on-year.

New-vehicle dealers remained the most optimistic sector, with a notable further increase in sales underpinning a nine-point rise in sentiment to 67.

Confidence in the sector has now surpassed the post-Covid-19 peak of 63 points, recorded in the second quarter of 2021, to reach a 13-year high, he notes.

Further, wholesalers, which are also partially consumer-facing, saw confidence rise by 8 points to 50, marking its best level since late 2024. The increase was supported by solid improvements in business conditions and higher sales volumes.

However, not all consumer-facing sectors performed well.

Retailers took a breather at the start of the new year, with retail confidence declining by seven points to 36, as base effects began to weigh on annual growth rates.

This is slightly below retail confidence’s long-term average of 40. Sales volumes softened for non-durables and durables, while semi-durables performed somewhat better in the first quarter.

Further, building contractors recorded a significant 11-point increase in confidence to 50. The improvement was supported by an improvement in activity, although the non-residential sector continues to outperform the residential sector, says Mhlanga.

Manufacturers were the laggards, with confidence in this sector declining by nine points to 30, which partially reverses the uptick in the fourth quarter of last year.

The sector continues to grapple with weak demand conditions, which are insufficient to generate a sustained recovery in output. Encouragingly, forward-looking investment indicators remain relatively upbeat.

The political stability of the Government of National Unity remains crucial to sustaining structural economic reforms and improved business sentiment, he says.

Meanwhile, LSE- and JSE-listed financial management firm Investec notes that the BCI shows that business confidence became less depressed for the third quarter in a row.

The BCI is approaching the neutral level of 50.

Realised business conditions remained negative, but less so, rising from -7 to -3, Investec says.

The expected, or forward looking, business conditions jumped to 4 from -15, which had previously been positive in the three quarters before the end of 2024 on the introduction of the two-pot retirement system and related withdrawals.

The improvement in the quarterly BCI came through in most sectors, with building contractors’ confidence increasing to 50 from 39, while new vehicle dealers reported a rise to 58 from 54 and the manufacturing sector saw a 16-point increase to 39 from 23.

Additionally, the business climate improved, tying in with the BCI readings and rising to 1 from -11, as sentiment in South Africa in general has seen some uplift in financial markets over the course of the past year and into this year, alongside an improved economic growth outlook, says Investec.

“South Africa also saw a credit rating upgrade at the end of 2025, interest rate cuts, a sensible budget, removal from the Financial Action Task Force grey-list, no further rolling loadshedding, and improvements in freight.

“While businesses are not yet confident about operating conditions on the below-50 reading, they are substantially less pessimistic, and the outlook has become positive.”

Meanwhile, Investec’s GDP growth forecast for this year is 1.5%, following estimated GDP growth of 1.3% for 2025.