Following two consecutive quarters of declines, the Rand Merchant Bank (RMB)/Bureau for Economic Research (BER) Business Confidence Index (BCI) rose by five points to 44 in the fourth quarter of this year, putting confidence three points above its long-term average.

This means that 44% of respondents are satisfied with prevailing business conditions.

In a BER media release, the companies note that the rebound is notable for its breadth, as confidence improved in five of the six sectors surveyed, with only building contractors registering weaker sentiment.

Taken together, the results suggest that the economy is regaining some momentum after remaining subdued in the middle of the year, the release notes.

The companies say this is in line with the modest improvement in activity seen in the GDP data released by Statistics South Africa on December 2, which showed that the economy expanded by 0.5% quarter-on-quarter (seasonally adjusted), marking the fourth consecutive quarter of economic expansion.

“The key positive is that the improvement is broad-based. Even among building contractors, the only sector to dip this quarter, sentiment remains close to its long-term average. While this is not a step-change, it is a meaningful turn in the right direction,” says RMB chief economist Isaah Mhlanga.

The survey took place from November 10 to 24.

BER and RMB note that positive developments were observed just before and during this period, including the removal of South Africa from the Financial Action Task Force (FATF) grey list, as well as a credit ratings upgrade by S&P Ratings.

In addition, local politics were relatively stable, with the Medium-Term Budget Policy Statement (MTBPS) being well received.

They noted that the rand was fairly strong and, importantly, stable.

The South African Reserve Bank (SARB) cut its policy interest rate by 25 basis points to 6.75% towards the end of the survey period, which is positive for the more interest-rate-sensitive sectors of the economy, particularly new-vehicle dealers.

This was despite inflation ticking up during the quarter but supported by expectations of a lower inflation outlook amidst the confirmation of a shift to a lower inflation target of 3%.

The companies note that the most notable improvement came from the manufacturing sector, where confidence rose by 16 points to 39, although from a low level and thus still remaining among the most subdued among the surveyed sectors.

The rise in manufacturing business confidence followed three consecutive quarters of declines and brought confidence to its highest level since 2022.
 

From an economic momentum perspective, it is important to note that production did not improve in line with the rise in confidence, but fixed investment indicators continued to look a little better, which is important for long-term dynamics, says BER and RMB.

Retail confidence also saw a big jump of 11 points to 43, from the third quarter confidence level that was unexpectedly weak. The rise brought confidence in line with averages recorded post-Covid.

Importantly, sales volumes held up well relative to a strong fourth quarter last year, which is positive for consumer spending.

Wholesale confidence also looked better with a four-point rise to 42 and driven by better non-consumer goods sales volumes.

Consumer goods wholesalers' sales remained unchanged, which might be a warning sign that the sustained momentum in retail spending may wane into 2026.

Like wholesalers, new vehicle dealers saw confidence increase by four index points to 58 and remain the only sector where the majority of respondents are satisfied with prevailing business conditions.

Finally, the only sector where confidence declined was building contractors where sentiment moved lower by seven points to 39.

Despite the decline in sentiment, RMB and BER note that activity improved, which suggests that the sector continues to recover, but importantly the broader building sector continues to perform well.

BOTTOM LINE

RMB and BER describe the broad-based increase in sentiment as a welcome signal after a “choppy year”, especially given that the country needs to see higher confidence to reignite private sector fixed investment and job creation in the economy.

“It is too early to celebrate, we need to see this tentative improvement being sustained for a couple of quarters,” says Mhlanga.

The companies note that continued structural reform progress remains pivotal so that improved demand can support a sustained improvement in production, leading to faster capex spend down the line.

They argue that there are significant policy risk events in the next few years, both locally and globally, which could keep businesspeople on edge.

Another encouraging outcome of the survey results was how both buying and selling price inflation slowed down.

This means the lower inflation target may be entrenched sooner rather than later, which could be positive for interest rate dynamics.

Looking ahead, RMB and BER note that it will be important to see if manufacturing output catches up with sentiment, if retail spending maintains momentum in 2026, and building contractors bounce back from this quarter's dip.

“The fourth-quarter RMB/BER BCI uptick is another green shoot. While promising, but still fragile, it will need steady policy progress and consistent demand to take root and grow,” the companies note.