South African business sentiment experienced a meaningful recovery in the final quarter of 2025, halting a trend of two consecutive declines to register a noticeable rebound across most sectors.
The Business Confidence Index (BCI), compiled by the Bureau of Economic Research (BER) and Rand Merchant Bank (RMB), climbed five points to reach 44, placing the reading three points above its long-term average of 42, as reported by Trading Economics. This upward movement indicates that 44 per cent of the surveyed respondents expressed satisfaction with prevailing business conditions, up from 39 per cent in the previous quarter, suggesting that the economy is finally regaining some of the momentum lost during the middle of the year.
The resurgence in optimism was catalysed by a confluence of positive political and financial developments that reduced systemic risk. These factors included South Africa’s removal from the Financial Action Task Force (FATF) greylist, a supportive credit rating upgrade from S&P Global, and a well-received Medium-Term Budget Policy Statement, all of which contributed to a more stable political backdrop. Furthermore, a resilient rand and a supportive interest rate environment, which saw the South African Reserve Bank cut the policy rate to 6.75 per cent late in the quarter, helped underpin a more constructive mood among business leaders, particularly those in sectors sensitive to financing conditions.
The improvement was notably broad-based, spanning five of the six sectors surveyed. The most significant advance came from the manufacturing sector, where confidence surged by sixteen points to reach 39. This marked its highest level since 2022 and followed a protracted period of decline, suggesting a tangible lift in future expectations for the industrial economy. While production volumes did not immediately align with this jump in sentiment, the modest improvement in fixed investment indicators is a potentially important signal for longer-term growth dynamics, according to the joint statement from BER and RMB.
Consumer-facing sectors also registered substantial gains, reflecting resilient underlying demand despite sustained pressure on household budgets. Retail sentiment posted a robust eleven-point rise to 43, recovering from an unexpectedly weak third quarter and bringing confidence back in line with post-pandemic averages. This was supported by sales volumes holding up well against a very strong festive season recorded the previous year. Confidence among wholesalers increased by four points to 42, primarily buoyed by stronger sales of non-consumer goods, such as machinery, equipment, and industrial supplies, which are typically business-to-business purchases and hint at rising corporate activity. Conversely, the stagnation in consumer goods sales at the wholesale level may foreshadow a moderation in retail activity early in 2026.
New-vehicle dealers maintained their position as the most confident group, with their sentiment index increasing by four points to a strong 58. This sector continued to benefit directly from the easing of financial conditions following the interest rate cut implemented late in the quarter, which lowers the cost of vehicle finance for both businesses and consumers. By contrast, the only sector to report a decline in confidence was building contractors, where the index slipped by seven points to 39. However, the underlying data revealed a contradictory increase in actual activity, suggesting that the sector’s operational recovery remains on track, with Isaah Mhlanga, Chief Economist at RMB, noting that the broader building sector continues to perform well.
The overall positive sentiment aligns with the modest improvement in the nation’s output, as the economy expanded by 0.5 per cent quarter-on-quarter, seasonally adjusted, marking the fourth consecutive quarter of growth, as reported by Statistics South Africa. Furthermore, an easing of both purchasing and selling price inflation was observed in the survey, raising the prospect that the Reserve Bank’s lower inflation target of 3 per cent could be entrenched sooner than anticipated, further supporting expectations of stability.
Despite the welcome fourth-quarter bounce, analysts cautioned against premature celebration. RMB’s Chief Economist stressed that the tentative improvement must be sustained over several consecutive quarters to be considered a genuine and durable recovery. The BER and RMB emphasised that continued progress on structural reforms remains absolutely crucial to translate the improved business demand into faster production, increased fixed capital spending—which has been a lagging factor in growth, as reported by Citadel—and, most importantly, meaningful job creation in the wider economy.