South African business confidence falls – but all is not lost

The Bureau for Economic Research has released the RMB Business Confidence Index (RMB/BER BCI) for the third quarter of 2022. It showed South Africa’s business confidence slipped to 39 points from 42 in the second quarter.

While it is discouraging, retail and wholesale confidence remains well above long-term averages. The result may have been offset by underlying issues in the building sector and the lagging effects of the KZN floods on the manufacturing sector.

The BCI is the percentage of respondents that rate prevailing conditions as satisfactory as an indicator of business confidence.

Business confidence can vary between 0 and 100, where 0 indicates an extreme lack of confidence, 50 is neutrality, and 100 is extreme confidence.

It represents the unweighted mean of five sectoral indices in South Africa, including manufacturers, building contractors, retailers, wholesalers and new vehicle dealers.

The third quarter BCI survey was conducted between 10 and 29 August. It covered 1,200 senior executives at companies of varying sizes in the abovementioned sectors.

The BCI drop to 39 points means that 61% of respondents are unsatisfied with prevailing business conditions.

BCI third-quarter results per sector

Confidence among retailers and wholesalers remained high, while a striking improvement was seen among new vehicle dealers, offsetting a 17-point decline in building confidence. The manufacturing BCI stayed low.

Retail and Wholesale

Retail confidence remained above its long-term average of 40, reaching 51 points from its previous 49 in the second quarter.

Despite a worrying drop in consumer confidence due to rising interest rates and inflation, retail confidence has been preserved by the reinstatement of Social Relief of Distress grants and a recovery in employment – particularly in the hospitality sector.

IT helped support consumer spending on essentials – like food and beverages – and a healthy level of clothing sales.

Improved turnover enabled retailers to handle higher operating costs which, in turn, pushed up profitability and confidence.

While confidence among wholesalers dropped from its second quarter mark of 58 points, it remains at a high-rated 50 points.

The drop results from depressed sales volumes of consumer and non-consumer goods from record highs earlier in the year.

New car dealers

At the beginning of 2022, new car dealers’ confidence weakened due to low stock levels created by constant global chip shortages – delaying new vehicle manufacturing – and unreliable import deliveries. This prevented them from taking full advantage of the increase in demand.

Despite this, the sector’s BCI bounced back to 40 points in the third quarter after falling from 54 to 29 in the second quarter.

This bounce back in confidence is partly attributed to the re-start of production at the Toyota plant in KwaZulu-Natal.

Building Contractors

Confidence among building contractors deteriorated sharply by 17 points to 29 in the third quarter compared to 46 in the second quarter.

This decline is attributed to:

  • Ongoing delays in the authorisation of building plans.
  • Postponement of tenders.
  • Persistent shortages of certain materials.
  • Load-shedding.
  • A lack of working capital – due to, among other things, continued late payments by the public sector.

Despite these factors, the determination in confidence is hard to justify, given the sharp increase in building activity – especially in the non-residential sector.


Manufacturing confidence eased slightly from 29 points to 26 in the third quarter, but this may be a result of the lagging effects of inferences that struck the sector earlier in the year.

There has been a notable improvement in domestic and export sales volumes, and production received a boost from the reopening of the Toyota and other flood-damaged plants in KwaZulu-Natal and less intense load-shedding in August.

RMB chief economist’s remarks on the BER BCI

RMB chief economist Ettienne le Roux noted that, while the third quarter drop in the BER BCI to below 40 is disappointing, the underlying picture is not as bad as the lower BCI implies.

“Confidence among retailers and wholesalers remains well above long-term averages, which speaks to the surprising resilience of consumer spending at a time when falling inflation in due course should ease the pressure on disposable income,” he said.

“Simultaneously, underlying activity in the building and the manufacturing sector is stronger than the third quarter confidence figures seem to imply,” he added.

Le Roux also said that fixed investment in manufacturing resumed its upward trajectory in the third quarter, to a level close to its long-term average.

However, he added that the danger of summer power outages is a notable concern, and mounting external headwinds and rising interest rates are still a problem for South Africa.


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