JOHANNESBURG, Aug 18 – South African business confidence strengthened modestly in July, although inflationary pressures and uncertainty linked to the conflict in the Middle East continued to constrain the economic outlook.
The South African Chamber of Commerce and Industry’s Business Confidence Index rose to 125.4 points in July from 123.5 in June, indicating a stabilisation in business sentiment after a sharp deterioration earlier in the year.
The improvement was supported by higher new vehicle sales, stronger exports and lower energy costs. The chamber also identified international tourism as a positive contributor, with the number of foreign visitors continuing to support business activity despite broader short-term instability.
However, rising inflation remained a drag on sentiment compared with a year earlier. Lower precious-metal prices also weighed on the index, highlighting the importance of commodity markets to South Africa’s trade position, currency and corporate earnings.
Sacci said the business environment continued to benefit from elevated global precious-metal prices and higher merchandise import volumes. Commodity prices remain particularly important for South Africa because they influence export earnings, the rand and the profitability of companies operating across key sectors of the economy.
Energy markets have emerged as another source of uncertainty. Sacci said the continuing conflict in the Middle East and its effect on crude oil prices and fuel supply were complicating domestic economic forecasts. Higher energy costs can feed into transportation, manufacturing and other operating expenses, adding to inflationary pressures facing businesses.
The chamber also pointed to developments surrounding the African Growth and Opportunity Act, or Agoa, as an important factor for South African exporters. The US Senate has approved a two-year extension of the trade programme, moving its scheduled expiration from December 2026 to the end of 2028. However, uncertainty remains over whether South Africa will continue to qualify for the preferential trade arrangement.
Sacci said improvements in South Africa’s creditworthiness and investment ratings had provided some support to the economy. At the same time, a tighter monetary policy stance from the South African Reserve Bank and persistently slow economic growth continue to weigh on business conditions.
The chamber warned that inflation and fiscal pressures remain significant challenges despite ongoing government efforts to address structural weaknesses and improve the sustainability of public finances.
“Although the South African economy must deal with slow performance and other structural challenges, the inflationary trend and the fiscal challenges remain despite continuous efforts to address the economically unsustainable demands for social adherence. Serious attention is needed, [especially for] the dire straits some local governments find themselves in,” Sacci said.
The July reading therefore points to a business sector that is showing some resilience but remains exposed to external shocks and domestic structural constraints. The trajectory of inflation, global commodity prices, energy costs and the country’s access to major export markets will remain important factors for business sentiment in the months ahead.
