On March 17, 2023, a customer was captured comparing prices while shopping at a Pick and Pay store in East London, South Africa. This image was taken by REUTERS/Siphiwe Sibeko/File Photo.
A report from Reuters on November 21, 2023, revealed that South Africa’s business confidence fell in the fourth quarter due to weak local demand for vehicles and high borrowing costs. The business confidence index dropped to 31 points in the fourth quarter from 33 points in the previous three months. This data was part of a survey by Rand Merchant Bank (RMB) and compiled by the Bureau for Economic Research. The decline in confidence among new vehicle dealers was also significant, marking the lowest level since the second quarter of 2020 when South Africa imposed its strictest COVID-19 lockdown.
The rising borrowing costs in Africa’s third-largest economy have affected consumer spending while businesses struggle to pass on higher input costs to buyers. Respondents to the survey highlighted logistical challenges such as delays at harbors and potholes on roads that affect timely delivery of goods. However, there was a positive trend among retailers with a 15-point jump in confidence. Despite high operating costs due to power cuts, non-durable retailers reported a slight decline in volumes due to price increases but with slightly eased cost pressures.
Isaah Mhlanga, chief economist and head of research at RMB, commented that “structural supply constraints around infrastructure and electricity remain a key challenge to operating in the South African business environment.” Although this decline reflects underlying demand weakness, it is important for businesses to adapt and find ways to overcome these challenges while ensuring sustainable growth for their operations.