A recent Reuters report revealed that South Africa’s business confidence fell in the fourth quarter of 2022, mainly due to weak local demand for vehicles and high borrowing costs. The decline was noted by the Bureau for Economic Research and compiled with the help of Rand Merchant Bank (RMB). The business confidence index dropped from 33 points in the previous three months to 31 points in the fourth quarter. Additionally, confidence among new vehicle dealers dropped by 24 points, marking the lowest level since the second quarter of 2020 when South Africa imposed its strictest COVID-19 lockdown.

Respondents to the survey pointed out that rising borrowing costs have affected consumer spending, while businesses are struggling to pass on higher input costs to buyers. Logistical challenges such as delays at harbours and dealing with potholes were also cited as factors affecting businesses. Despite these challenges, there was a positive note as retail sector confidence showed a 15-point jump from its previous levels. Non-durable retailers reported a decline in volumes due to price increases, but overall, respondents said that cost pressures had slightly eased compared to earlier periods.

Isaah Mhlanga, chief economist and head of research at RMB stated that structural supply constraints around infrastructure and electricity remain a key challenge to operating in South Africa’s business environment. However, he added that the decline in business confidence also reflects underlying demand weakness. Overall, this news highlights some of the challenges facing South Africa’s economy and businesses amid rising borrowing costs and logistical issues.

By Editor

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