South African business confidence fell to a five-month low in March, reflecting mounting concerns among firms over currency weakness, slowing trade and rising energy costs linked to escalating tensions in the Middle East.
The Business Confidence Index compiled by the South African Chamber of Commerce and Industry dropped to 131.3 in March from 134.6 in February, highlighting a deterioration in sentiment as geopolitical risks weighed on Africa’s most industrialised economy.
According to SACCI, the decline was driven by weaker real economic activity, including subdued retail trade and a slowdown in export volumes, as businesses grappled with the spillover effects of the Iran conflict.
“The lower level of confidence reflects unease in the business environment,” the chamber said, pointing to a combination of domestic and external pressures.
A key concern has been the volatility of the rand, which has come under pressure amid global risk aversion. Investors have tended to retreat from emerging market assets during periods of geopolitical uncertainty, weakening currencies such as South Africa’s and raising the cost of imports.
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At the same time, the surge in global oil prices — triggered by fears of supply disruptions in the Strait of Hormuz — has intensified concerns about energy costs. South Africa, which relies heavily on imported fuel, is particularly vulnerable to such shocks.
Higher fuel prices have a broad impact across the economy, increasing transport costs, raising production expenses and feeding into inflation, all of which weigh on business profitability and consumer spending.
SACCI said businesses were increasingly worried about both the availability and affordability of energy, a critical issue for an economy already constrained by infrastructure bottlenecks and periodic power shortages.
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Despite the decline in confidence, the chamber noted that some positive factors helped cushion the downturn. These included stronger new vehicle sales, a rebound in international tourism and relatively stable inflation in recent months.
These supportive elements reflect a partial recovery that began in 2025, when South Africa’s economy showed signs of improvement following a period of weak growth and fiscal strain.
Government efforts to stabilise public finances and maintain relatively low inflation had helped boost investor sentiment toward the end of last year, creating a buffer against external shocks.
However, analysts warn that this fragile recovery could be undermined if global instability persists. The government had projected economic growth of around 1.6 percent in 2026, but economists say that forecast may now need to be revised downward.
“The outlook has become more uncertain due to global developments,” one Johannesburg-based economist said, noting that sustained high energy prices and financial market volatility could dampen investment and consumption.
The impact of the Iran conflict has been particularly pronounced in financial markets, where share prices have come under pressure amid heightened uncertainty.
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South African assets, including equities and bonds, are highly sensitive to shifts in global sentiment, making the country vulnerable to sudden capital outflows during periods of risk aversion.
Economists say that continued weakness in the rand could further exacerbate inflationary pressures, forcing policymakers to maintain tighter monetary conditions for longer than previously expected.
This, in turn, could constrain credit growth and limit the pace of economic expansion.
Looking ahead, much will depend on the trajectory of the Middle East crisis and its impact on global energy markets. A prolonged disruption could sustain high oil prices, while any escalation in conflict risks further destabilising financial markets.
For South Africa, the challenge will be to maintain macroeconomic stability while navigating an increasingly uncertain global environment.
The latest SACCI data underscores how external shocks continue to shape the country’s economic outlook, even as domestic reforms seek to support a gradual recovery.
While pockets of resilience remain, the decline in business confidence highlights the delicate balance facing policymakers and businesses alike as they contend with both local constraints and global volatility.
