South African business confidence climbed three points in the first quarter of 2026, boosted by a stable government, supportive interest rates, and a stronger rand, though analysts warned that ongoing geopolitical tensions in the Middle East could threaten growth.
The Rand Merchant Bank (RMB) survey, compiled by the Bureau of Economic Research, showed business confidence at 47 points for the quarter, marking the highest reading since 2015 outside the post-COVID recovery period.
“Geopolitical developments, largely beyond South Africa’s control, remain top of mind for many businesses,” said Isaah Mhlanga, chief economist at RMB.
The survey highlights cautious optimism among firms as domestic factors such as stable interest rates, a resilient rand, and policy support provided relief amid persistent economic challenges. President Cyril Ramaphosa reinforced these concerns during a speech earlier this week, noting that the Middle East conflict has already disrupted supply chains across Africa and contributed to rising energy costs.
Drivers of Confidence
The improvement in sentiment follows government measures addressing critical domestic issues, including water shortages, rising crime rates, and unemployment. Economists said these policies, combined with a steady macroeconomic environment, helped underpin business optimism in the first quarter.
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Mhlanga noted that while the rise in confidence is encouraging, translating this into sustained economic growth will require stronger domestic 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,” he said.
The survey also highlighted the cushioning effect of the South African rand, which has strengthened against the U.S. dollar, alongside stable interest rates. These factors helped businesses manage input costs and plan investment decisions amid global uncertainty.
Risks on the Horizon
Despite positive indicators, analysts cautioned that external shocks, particularly from the Middle East, could affect South Africa’s import-dependent sectors, including energy and manufacturing. Rising global oil prices and supply chain disruptions could strain profit margins and slow investment, potentially offsetting gains in domestic sentiment.
The RMB report suggests that businesses are aware of these risks but remain cautiously optimistic, betting on policy interventions and structural reforms to mitigate external pressures.
South Africa’s economy faces a balancing act: maintaining domestic confidence while preparing for potential shocks in global markets. Continued monitoring of geopolitical developments, fiscal discipline, and policy implementation will be key to sustaining the recent upswing in business sentiment.
As the first-quarter data signals, business confidence has improved, yet economists warn that translating sentiment into real economic expansion will require decisive action to ensure structural resilience and mitigate vulnerabilities from international developments.
With firms cautiously buoyed by stable macroeconomic conditions and government support, the challenge for South Africa in 2026 remains ensuring that optimism translates into durable growth and job creation across the economy.
