Business confidence in South Africa strengthened further in the first quarter of 2026, signalling a gradual rebound in corporate sentiment despite persistent domestic and global headwinds.
The latest RMB/Bureau for Economic Research Business Confidence Index (BCI), released Wednesday, rose by three points to 47 in the first quarter, extending gains recorded at the close of 2025.
The reading now stands six points above its long-term average and 20 points above the post-Covid trough reached in the second quarter of 2023. Stripping out the immediate post-pandemic rebound, it marks the highest level of business confidence since 2015.
The survey, conducted between February 12 and 23, reflected sentiment buoyed by a positively received State of the Nation Address and sustained political stability under the Government of National Unity ahead of the February Budget. While any reaction to the Budget itself fell outside the survey window, RMB described the prevailing policy climate as broadly supportive.
A firmer rand — which appreciated by seven per cent against the US dollar compared with the previous quarter — helped ease import cost pressures. In addition, interest rates remain notably lower than a year ago. Although the South African Reserve Bank kept the repo rate unchanged in January, it is still 100 basis points below its level a year earlier, reinforcing a more accommodative financial environment.
However, the improvement in the headline index was uneven across sectors.
Confidence among manufacturers and retailers declined during the quarter, partly reversing earlier gains. In contrast, strong rebounds among new vehicle dealers, wholesalers and building contractors lifted the composite index.
New vehicle dealers emerged as the standout performers, with confidence surging nine points to 67 — a 13-year high that surpasses the post-Covid peak recorded in 2021. The jump was supported by a marked rise in sales volumes, suggesting resilient demand for high-value consumer goods.
Wholesalers also reported improved conditions, with confidence climbing eight points to 50, its strongest level since late 2024, underpinned by firmer sales and better trading conditions.
Building contractors posted one of the most significant gains, as confidence rose 11 points to 50. Activity levels improved over the quarter, although non-residential construction continued to outperform the residential segment.
Retailers, however, faced renewed pressure. Confidence in the sector dropped seven points to 36, slipping marginally below its long-term average of 40. Sales of durable and non-durable goods softened, while semi-durable goods showed comparatively better performance.
Manufacturers remained the weakest link. Sectoral confidence fell nine points to 30, underscoring ongoing challenges in sustaining output growth. Weak demand continues to weigh on production, although forward-looking investment indicators suggest a degree of optimism.
The mixed sectoral performance unfolds against mounting external and domestic risks. Geopolitical tensions have intensified amid fears of escalation in the Middle East. At home, the deepening water crisis in Gauteng, flooding in parts of Limpopo and Mpumalanga, and the persistent foot-and-mouth disease outbreak continue to strain key sectors, particularly agriculture.
High-frequency indicators further point to a possible loss of momentum on the production side of the economy in the fourth quarter of 2025, with official GDP data due next week expected to provide clearer direction.
Commenting on the outlook, RMB Chief Economist Isaah Mhlanga said sustained gains in confidence would be critical to unlocking fixed investment.
“The further increase in the composite RMB/BER BCI is encouraging. Sustained improvements in confidence are needed to kick-start fixed investment, and the current above-average level suggests we may well see a rebound in capital expenditure during 2026. However, there is a risk that the recovery is becoming less balanced,” Mhlanga said.
He added that manufacturers remain particularly sensitive to overall demand conditions, noting that subdued confidence in the sector indicates that improved sentiment elsewhere has yet to translate into stronger domestic demand.
For now, the upward trajectory in business sentiment offers cautious optimism. Yet converting improved confidence into robust domestic demand, higher investment and sustained growth remains the central test for Africa’s most industrialised economy in the months ahead.
