Business confidence increases, but will come under pressure from US tariff

The Citizen

a day ago

Although business confidence is higher since the beginning of 2025 compared to the same seven months in 2024, US tariffs can change all that.
Business confidence increased in July, but the 30% US tariff will put it under pressure once the fallout starts as orders dry up and local companies have to cut expenses and staff.
According to the SACCI Business Confidence Index (BCI), the business climate improved over the short-term between June and July, as well as the medium-term from July 2024 to July 2025. In the short-term, 11 of the 14 sub-indices either remained unchanged or reflected a positive business climate, while over the medium-term, 10 sub-indices continued to imply an improved business climate.
Over the year to July 2025, business confidence increased by 7.6 index points and by 3.5 index points between June and July 2025. The average for the BCI in the first seven months of 2025 was 118.6, 7.7 index points higher than the 110.9 for the corresponding period in 2024.
The most positive short-term impact on business sentiment in July were made by an increase in new vehicles sold, increasing manufacturing output, the increasing global price of gold and platinum and lower inflation.
Reduced volumes of merchandise imports, fewer overseas tourists and the decreased real value of building plans passed were signs of a weakening business climate.
The medium-term (year-to-year) improved business environment was evident from increasing inward tourists, rising sales of new vehicles, lower inflation and higher world prices for precious metals.
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Reduced export volumes only negative from year ago
Reduced volumes of merchandise exports were the only notable negative impact on the business environment from a year ago. Statistics for the automotive sector already showed a decrease in exports of about 80%.
Richard Downing, economist at SACCI, says more uncertainty for South Africa could start weighing on economic activity as deadlines for additional US tariffs expire without substantial permanent agreements and progress.
'Economic growth could improve if trade negotiations lead to a more predictable framework and rational tariffs. Negotiations should support business and investor confidence, predictability and sustainability prior to other considerations.
'The imposition of a general US tariff of 30% on exports from South Africa could have unintended and austere consequences for the South African economy and for longer-term business relations. The categories of exports and the sectors affected will also play a role in how it affects economic growth and employment in the country.'
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US tariffs must be sorted out to grow the economy
Downing says given South Africa's open economy, with 32% of output being exported, it remains obligatory that all global economic and business relationships be fostered.
He points out that SACCI is concerned that the International Monetary Fund (IMF) forecasts South Africa's real economic growth at 1% for this year and 1.3% for 2026, while the South Africa Reserve Bank, at its Monetary Policy Committee (MPC) meeting at the end of July forecast growth of 0.9% for this year and for 2026.
'With such subdued economic performance, it becomes important that all efforts should be taken to enhance positive foreign trade relations, including the US, especially with the possibilities of revisiting the provisions of the Agoa Agreement.
'Although local business confidence has at least stabilised, it is important that it returns to levels achieved earlier in the year as the government of national unity took shape.
'The downside risks of potential or real higher trade tariffs to the economy, elevated uncertainty and geopolitical tensions that persist should make way by restoring confidence, predictability and sustainability of economic performance.'