Sacci attributed the March decline largely to external pressures linked to the ongoing conflict in the Middle East, which has contributed to increased volatility in key economic indicators.
Image: Karen Sandison / Independent Media
South African business sentiment edged lower in March as global geopolitical instability, particularly in the Middle East, began to exert greater pressure on domestic financial and trade conditions.
The latest Business Confidence Index (BCI) released by the South African Chamber of Commerce and Industry (Sacci) on Tuesday showed a decline of 3.3 points, bringing the index to 131.3 for the month. This marks the second consecutive monthly drop in 2026, according to Business Report.
Despite the setback, confidence levels remain stronger than a year ago, underscoring a broadly improved baseline compared to 2025.
Sacci reported that the index was 7.8 points higher than in March 2025, while the average for the first quarter of 2026 stood at 132.4, compared with 123.1 during the same period last year.
The March decline follows a volatile start to the year, with the index slipping in January before recovering in February.
According to Sacci, the latest weakening was largely driven by external shocks linked to ongoing conflict in the Middle East, which has disrupted global markets and heightened uncertainty across key indicators.
“Between February and March 2026 (month-on-month) the decline in the BCI was mainly the result of a more volatile and weaker rand exchange rate, lower share prices on the JSE, the lower global price of precious metals, and decreased volumes of merchandise imports,” the organisation said.
It added that these movements were primarily the result of exogenous pressures stemming from the conflict, particularly its influence on global energy markets.
However, some domestic factors helped offset the decline. Stronger new vehicle sales, improved international tourism arrivals, and lower inflation provided partial support to overall sentiment during the month.
On a year-on-year basis, Sacci pointed to several positive contributors to confidence, including higher inbound tourism, stronger precious metal prices, increased vehicle sales, and gains in the JSE all-share index.
At the same time, the chamber warned of ongoing structural and cyclical risks facing the economy in 2026. These include subdued trade volumes, weak retail performance, rising energy costs, sluggish manufacturing activity, and a continued decline in real building approvals.
Sacci noted that global conditions in March were heavily influenced by the Middle East conflict, particularly through its impact on oil supply and pricing. While South Africa has benefited somewhat from strong commodity prices and a relatively stable currency, the broader external environment remains a concern.
The chamber said the unusually strong improvement in business confidence seen towards the end of 2025 and into early 2026 presents an opportunity to translate sentiment into tangible economic activity.
“South Africa is in the fortunate situation that its business sentiment is to some degree hedged against unique negative events. This benefit may however create a false impression where the real economy shows signs of stagnation,” it said.
Economists echoed the concern that early signs of global strain are beginning to filter into domestic indicators.
North-West University Business School economist Prof Raymond Parsons said the BCI is reflecting the initial fallout from the global energy shock linked to the Middle East conflict.
“On the positive side, the initial setback to business sentiment may well be temporary, and the economy nonetheless also has resilience to draw upon in adjusting to current external economic shocks,” he said.
Parsons added that uncertainty around growth and inflation is increasing, with future sentiment dependent on the duration of the conflict, interest rate decisions by the South African Reserve Bank, and policy responses aimed at easing cost-of-living pressures.
He also pointed to the role of government’s recently appointed ministerial task team in cushioning the impact on fuel, food security and household costs.
North West University economist Prof Waldo Krugell said the latest figures represent one of the first clear signals of global instability feeding through into local economic indicators.
“The impact of the US and Israel's war with Iran first hit the exchange rate, JSE and oil prices and that shows in the index,” he said.
He warned that further pressure is likely to emerge in the coming months as higher import costs and inflationary effects work their way through the economy.
“The second-round impacts on the cost of imported products and inflation in South Africa more broadly, are still in the pipeline. It shows that we cannot escape the consequences of global events.”
Meanwhile, Unisa economist Dr Eliphas Ndou said weakening confidence could place renewed strain on recent macroeconomic progress.
He noted that the index is becoming increasingly sensitive to oil price volatility, exchange rate movements and inflationary pressures linked to global uncertainty.
“The index, as a leading indicator of economic activity, points to an impending slowdown in economic growth,” he said.
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