Worrying drop in Durban business confidence index

IOL News

25-07-2025

Concerns over business confidence in Durban
Image: Independent Newspapers
The findings of the latest Durban Business Confidence Index (BCI) are raising concerns about future economic growth in the city, with the report indicating that businesses are increasingly pessimistic.
The Business Confidence Index assesses business confidence in the city, and the latest findings highlight significant concerns regarding the overall business climate. The report is compiled by the Macroeconomics Research Unit at the University of KwaZulu-Natal.
The report presents the Durban BCI for the second quarter of 2025 (2025Q2). The index ranges from 0 to 100, where a score below 50 implies a lack of confidence in the Durban economy, a score of 50 indicates that the business situation is normal or neutral, and a score above 50 denotes confidence in the economy.
'The Durban BCI continued to decline for a third consecutive quarter in 2025Q2, dropping to 52.40 points from 56.32 points in the previous quarter. This suggests that businesses are becoming less optimistic about both current and future economic conditions in Durban,' the report stated.
However, the report noted that, while the Durban BCI declined, it remains above the neutral zone and significantly outperforms the national BCI. The national index fell from 45 points in the first quarter of 2025 to 40 points in the current quarter. Therefore, it appears that the ongoing decline in the Durban BCI is likely driven by the national economic situation rather than factors specific to Durban, the report said.
Looking at the performance of individual industries, the report noted that following a strong improvement in 2025Q1, driven by favourable weather conditions, among other factors, business confidence in the agricultural sector decreased by 51% in the second quarter.
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This decline is primarily attributed to global uncertainties and animal diseases that affect production and market stability in the animal husbandry sub-sector. However, confidence in the agricultural sector was 1% higher in 2025Q2 than in the corresponding quarter in 2024.
Manufacturing experienced a sharp decline in business confidence during the second quarter of 2025, with confidence in this sector dropping from 61.71 to 41.82 between the first and second quarters. Ongoing global trade uncertainty, weak domestic and global demand, high operating costs, infrastructure constraints, and logistical inefficiencies continue to be the main causes of this deterioration.
The financial intermediation, insurance, real estate, and business services sector experienced a 2% contraction, declining from 54.85 in the first quarter of 2025 to 53.52 in the second quarter. This indicates that confidence in this sector was 0.96% lower compared to the same quarter in 2024. Business confidence in the electricity, gas, and water sector was also significantly low in the second quarter of 2025.
The wholesale and retail trade, repair of motor vehicles, motorcycles, and personal and household goods, as well as catering and accommodation, recorded a 13% improvement in business confidence in the second quarter of 2025, rising from 43.79 in the previous quarter to 49.63 in the quarter under review.
This improvement, the report said, is largely due to reductions in the cost of living, with inflation falling below the target range, coupled with the recent interest rate cut. However, this is countered by the increasing tax burden and the recent rise in the prices of petroleum products.
The transport, storage, and communication sector recorded a 6% improvement in confidence, which was attributed to improved land cargo and air transport operations. The report also found that poor service delivery continues to be a concern for businesspeople in Durban.
The Survey of Business Opinion, used to compute the Durban BCI for 2025Q2, reveals that 71.4% of respondents reported that if one complained about poor service delivery, it is unlikely that the local municipality would address it within a reasonable timeframe.
Respondents identified environmental management (sewerage, solid waste, and parks) (28.6%) as the poorest service, followed by roads (26.8%), water (23.2%), public safety (police, fire, and ambulance) (12.5%), and electricity (8.9%).
Palesa Phili, CEO of the Durban Chamber of Commerce and Industry NPC, stated, 'As organised business, we believe the findings provide a true reflection of the mood of the business community in Durban. However, the sustained downward trend of the DBCI is a cause for concern.
'Despite improvements in four industries, agriculture remains a key driver of economic growth, while manufacturing plays a pivotal role in job creation. In the context of global restrictions, we must position Durban as a leading manufacturing hub and leverage our unique economic architecture—such as the Special Economic Zone and port.
'This would significantly impact employment and GDP while enhancing self-reliance. Moreover, economic reforms must be implemented to support key economic sectors in Durban.
'Furthermore, the Quarter 2 report also revealed that 71.4% of respondents stated that, when lodging a complaint regarding poor service, it was unlikely to be resolved in a timely manner. The situation remains deeply troubling. As the Durban Chamber of Commerce and Industry NPC, we believe that unless structural issues—such as infrastructure, security, and basic service delivery—are urgently addressed, business confidence will continue to deteriorate. The City must prioritise addressing these issues to boost and sustain business confidence and work towards bridging the trust deficit between the private and public sectors.'
Professor and economist Bonke Dumisa said, 'We are not surprised by the declining Business Confidence Index. There are too many avoidable wrongs happening in eThekwini. The issue of sewage spilling into rivers and onto the beach is totally unacceptable and could have been avoided.'
THE MERCURY