South Africa is in serious tariff trouble

South African business sentiment fell to the lowest level in a year, as firms began navigating a new era of US tariffs that kicked in last month.

A quarterly business confidence index compiled by FirstRand’s Rand Merchant Bank and Stellenbosch University’s Bureau for Economic Research dropped 1 point to 39 in the three months through June, according to a report published on Wednesday.

“Front-loading, cancellations and production holidays in the automotive sector” affected confidence in the period, the lender said. “Overall, it is safe to postulate that it was negative for sentiment.”

At current levels, sentiment is insufficient to boost investment in Africa’s most industrialised economy and lift economic growth and employment rates, it said.

South Africa’s economy has remained stagnant for more than a decade, and its unemployment rate is one of the world’s highest. 

US President Donald Trump imposed stiff tariffs on his trading partners on 7 August as part of his new aggressive trade regime. They included a 30% levy on South African exports entering the US.

The tariffs are expected to crimp the country’s automotive and agricultural industries, with 30,000 jobs at risk.

Other economies navigating a more fragmented global trade order have also experienced a dampening of business confidence, said Isaah Mhlanga, chief economist at RMB.

The gauge tracking manufacturing sentiment had the lowest reading at 23, declining by 10 points, with the uncertain global trade environment hitting the sector the hardest.

The retailers index fell 10 points to 32, and the wholesalers gauge dropped 12 points to 38.

To generate jobs and grow the economy, reforms in the logistics, water and local government sectors need to be accelerated, Mhlanga said.

“While corruption, red tape, sluggish logistics, and other structural issues in the South African economy continue to feature, many comments also highlighted the failure of service delivery at a municipal level.”