Challenging Business Climate
The business climate improved over the short-term (between June and July 2025) as well as the medium-term (from July 2024 to July 2025). In the short-term, eleven of the fourteen BCI sub-indices either remained unchanged or reflected a positive business climate, while over the medium-term, ten sub-indices continued to imply an improved business climate. Over the year to July 2025, the BCI rose 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 – it is 7.7 index points higher than the 110.9 for the corresponding period in 2024.
The most positive short-term impacts on business sentiment in July were made by an increase in new vehicles sold, increasing manufacturing output, the rising 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. Reduced volumes of merchandise exports was the only notable negative impact on the business environment from a year ago.
More uncertainty for South Africa could start weighing on economic activity as deadlines for additional USA 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 tariff of 30% by the USA on exports from South Africa to the USA could have unintended and austere consequences for the South African economy and for longer-term business relations. The type (categories) of exports and the sectors affected will also play a role in how it impacts economic growth and employment in South Africa. Given South Africa’s open economy, with 32% of output being exported, it remains obligatory that all global economic and business relationships be fostered.
SACCI is concerned that the IMF forecasts South Africa’s real economic growth at 1% and 1.3% for 2025 and 2026, while the SA Reserve Bank, at its MPC meeting at the end of July 2025, forecast growth of 0.9% and 1.3% for 2025 and 2026, respectively. With such subdued economic performance, it becomes important that all efforts should be taken to enhance positive foreign trade relations – including the USA, especially with the possibilities of revisiting the provisions of the AGOA Agreement.
Though local business confidence has at least stabilised, it is important that it return to levels achieved earlier in the year as the newly formed 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. For a full background to this month’s SACCI BCI see the full BCI report.
