Finance Minister Enoch Godongwana announced increases on Wednesday. RMB said although any post-Budget reactions fell outside the survey window, the overall policy environment was described as supportive.
Image: Supplied
South African business confidence strengthened further in the first quarter of 2026, suggesting that the country’s corporate sector is steadily regaining its footing despite lingering domestic and global risks.
The RMB/BER Business Confidence Index (BCI) released on Wednesday rose by three points to 47 in the first quarter, building on gains recorded at the end of 2025.
The latest reading places the index six points above its long-term average and 20 points above the post-Covid low reached in the second quarter of 2023. Excluding the post-pandemic rebound, it is the highest level of confidence since 2015.
The survey, conducted between 12 and 23 February, captured sentiment buoyed by a well-received State of the Nation Address and continued political stability under the Government of National Unity ahead of the February Budget.
RMB said although any post-Budget reactions fell outside the survey window, the overall policy environment was described as supportive.
A stronger rand, which appreciated by 7% against the US dollar compared with the fourth quarter of last year, helped ease cost pressures for importers.
At the same time, interest rates remain significantly lower than a year ago. While the South African Reserve Bank kept the repo rate unchanged in January, it is still 100 basis points below its level a year earlier, contributing to a more accommodative financial backdrop.
However, RMB said the improvement in the headline index was not broad-based. Confidence among manufacturers and retailers declined in the first quarter, partially reversing earlier gains.
In contrast, strong rebounds among new vehicle dealers, wholesalers and building contractors lifted the overall index.
New vehicle dealers were the standout performers. Confidence in the sector surged by nine points to 67, marking a 13-year high and surpassing the post-Covid peak recorded in 2021.
The improvement was underpinned by a notable increase in sales volumes, reflecting resilient consumer demand for big-ticket items.
Wholesalers also reported firmer conditions, with confidence rising by eight points to 50, its best reading since late 2024. Improved business conditions and stronger sales volumes supported the gain.
Building contractors registered one of the largest improvements, with confidence climbing by 11 points to 50. Activity improved during the quarter, although the non-residential segment continued to outperform residential construction.
By contrast, retailers experienced a setback. Retail confidence dropped by seven points to 36, slipping slightly below its long-term average of 40. Sales volumes for durable and non-durable goods softened, while semi-durables fared somewhat better.
Manufacturers were the weakest link. Confidence in the sector declined by nine points to 30, highlighting persistent challenges in generating a sustained recovery in output.
Weak demand conditions remain a constraint, although forward-looking investment indicators are said to be relatively upbeat.
The mixed sectoral picture comes against a backdrop of ongoing headwinds. Geopolitical tensions have intensified amid concerns about potential escalation in the Middle East.
Domestically, the water crisis in Gauteng has worsened, flooding has affected parts of Limpopo and Mpumalanga, and the foot-and-mouth disease outbreak continues to weigh on agriculture.
High-frequency data also point to a possible loss of momentum in the production side of the economy during the fourth quarter of 2025, though official GDP data due next week will provide clarity.
According to RMB chief economist Isaah Mhlanga, sustained improvements in confidence are essential to reignite 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 while acknowledging that forward-looking indicators point to some improvement.
“Manufacturers are particularly sensitive to overall demand dynamics, and their subdued confidence suggests that improved sentiment elsewhere has not yet translated into stronger domestic demand.”
For now, the trajectory of business sentiment is encouraging. Yet translating improved confidence into stronger domestic demand, higher investment and durable growth remains the key challenge for South Africa’s economy in the year ahead.
BUSINESS REPORT