South African Business Confidence Rises in Q3

(Reuters) – South African business confidence increased in the third quarter, driven by enhanced optimism regarding the business climate following the establishment of a coalition government and stable electricity supply, as indicated by a recent survey.

The business confidence index climbed to 38 points in the third quarter, up from 35 points in the previous quarter, according to the survey conducted by Rand Merchant Bank (RMB) and compiled by the Bureau for Economic Research.

Isaah Mhlanga, chief economist at RMB, noted, “Fortunately, the widely anticipated interest rate cut in South Africa later this month, supported by lower consumer inflation and the introduction of the two-pot retirement system, should stimulate domestic demand for the rest of the year.”

The South African Reserve Bank is projected to begin reducing interest rates this month, marking the first decrease in four years.

In May, the African National Congress lost its parliamentary majority for the first time in 30 years, leading to the formation of a broad coalition with several parties, including the market-friendly Democratic Alliance.

Additionally, state-owned power utility Eskom has successfully maintained electricity for over five months without scheduled blackouts, addressing power cuts that have hindered economic growth for over a decade.

However, business activity remains limited due to weak demand, although the survey anticipates conditions will improve in the next quarter.

Retail confidence increased to 45 points, up from 39, benefiting from improved sales volumes in durable and semi-durable goods. Manufacturing sector confidence remained stable at 28 points, as production declines due to falling exports and domestic demand were counterbalanced by optimism in new vehicle sales, which surged to a one-year high.

The wholesale trade sector exhibited the most optimism, with over half of respondents expressing satisfaction with current business conditions.