South African business confidence slipped again in the third quarter of 2025, weighed down by steep tariffs on the country’s exports to the United States.
According to the latest Rand Merchant Bank (RMB) survey, compiled by the Bureau of Economic Research, confidence declined by one point to 39. The figure stands three points below the long-term average of 42, highlighting persistent fragility in the economy.
The survey, conducted from August 6 to 25, coincided with the imposition of a 30% tariff on Johannesburg’s exports to the U.S. This marks Sub-Saharan Africa’s highest trade penalty under President Donald Trump’s administration and has placed heavy strain on South African industries. The automotive sector, in particular, faced production halts and order cancellations during the survey period, amplifying concerns across the manufacturing base.
Isaah Mhlanga, Chief Economist at RMB, acknowledged that the challenges were not unique to South Africa.
“Last year brought significant political and economic policy changes in many countries, including South Africa, and following initial excitement, or in some cases, disappointment, conditions are normalising into a difficult emerging global world order.”
Isaah Mhlanga, Chief Economist at RMB
In contrast to the sharp fall in confidence, another survey released on Wednesday suggested South African businesses experienced a modest improvement in operating conditions during August. Analysts attributed this to easing cost pressures and relative stability in global commodity markets.
Meanwhile, the rand gained significant ground in late August, hitting a nine-month high against major currencies. The currency was supported by rising gold prices and expectations of a U.S. Federal Reserve rate cut, after Chair Jerome Powell signaled in late August that a reduction could be on the agenda at the September meeting.
Energy, Regulation And Digital Risks Remain
South Africa’s 2025 business environment is best described as one of cautious optimism mixed with stubborn challenges. GDP growth is projected to hover between 1.6% and 1.9% this year. While this represents a mild recovery from past stagnation, analysts warn that such growth levels are insufficient to make a meaningful dent in unemployment or widespread economic hardship.
Energy and water security remain critical risks. Despite private-sector involvement in power generation and efforts to curb load shedding, disruptions persist, particularly undermining small and medium-sized enterprises (SMEs). The uncertainty surrounding electricity supply has hindered long-term investment planning and continues to weigh on productivity.
Regulatory shifts are also reshaping the cost environment. VAT increases and tightened tax administration by the South African Revenue Service (SARS) have placed new pressures on business cash flows. For SMEs, access to funding remains limited, with traditional lenders cautious. However, some financial institutions are beginning to extend targeted support to firms with strong management and growth prospects.
Businesses Adapt To Seize Opportunities
At the same time, digital transformation is reshaping business strategies. Growing adoption of technology offers efficiencies and access to global markets, but companies are increasingly exposed to cybersecurity risks. Experts argue that strategic financial management, combined with embracing environmental, social, and governance (ESG) principles, is essential for resilience in this evolving landscape.
Mhlanga and other economists stress that reforms in key sectors, especially electricity and logistics, will determine how well businesses adapt to the current climate. While confidence levels have dipped, there is recognition that South Africa retains long-term potential if reforms can translate into tangible improvements.
For now, South Africa’s business climate reflects a delicate balance of resilience and vulnerability. It is a slow-moving recovery punctuated by structural weaknesses, but also opportunities for those able to innovate and adapt.
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