South Africa Business Confidence Rises in July as Inflation Stays High
South Africa · MARKETS
Key Facts
—Confidence index: The South African Chamber of Commerce and Industry business confidence index rose to 125.4 in July 2026, up from 123.5 in June.
—Headline inflation: Consumer price inflation reached 5.0 percent from a year earlier in June 2026, up from 4.5 percent in May and above the South African Reserve Bank’s 3 percent target, adopted in November 2025, which allows one percentage point either side.
—Repo rate: The South African Reserve Bank kept its repo rate unchanged at 7.0 percent at the July 2026 Monetary Policy Committee meeting, after a 25-basis-point hike in May.
—Producer prices: Producer price inflation eased slightly to 7.5 percent in June 2026, from 7.8 percent in May, driven mainly by fuel and energy-related inputs.
—Household expectations: Households expect prices to rise by 6.0 percent over the next 12 months and by an annual average of 9.1 percent over five years, according to the Bureau for Economic Research.
—Business sentiment: The RMB/BER Business Confidence Index fell from 47 in the first quarter of 2026 to 39 in the second quarter, just below its long-term average of 40.
South Africa business confidence improved modestly in July 2026, but inflation at 5.0 percent and a restrictive repo rate of 7.0 percent continue to squeeze firms and households. The gain masks a fragile recovery shaped by global energy shocks and weak domestic demand.
What the July confidence data shows
The South African Chamber of Commerce and Industry reported that its business confidence index rose to 125.4 in July 2026, from 123.5 in June. The chamber said the index appeared to have bottomed out after April’s steep decline.
Three factors supported the improvement: new-vehicle sales, stronger export volumes, and softer energy prices compared with the peak of the oil shock. These were partly offset by higher inflation and lower precious-metal prices, which weigh on mining revenues.
The chamber linked the energy price pressure to the war in the Middle East, which the Bureau for Economic Research attributes to the conflict between the United States and Iran. It warned that the conflict’s destabilising effect on crude oil prices is impeding trade and spending patterns globally.
Inflation remains the core concern
Headline consumer inflation accelerated to 5.0 percent from a year earlier in June 2026, up from 4.5 percent in May. That is the highest reading since June 2024 and pushes the figure above the Reserve Bank’s 3 percent target, adopted in November 2025, which carries a tolerance band of one percentage point either side.
Transport inflation of 12.7 percent from a year earlier was the main driver, reflecting higher petrol prices and the broader energy shock. Housing and utilities, along with insurance and financial services, also contributed to the increase.
Core inflation, which excludes food and fuel, remained more moderate at around 4.1 percent. That suggests the spike is largely supply-side rather than demand-driven, but producer price inflation of 7.5 percent in June shows cost pressures are still moving through domestic value chains.
Monetary policy stays restrictive
The South African Reserve Bank kept its repo rate at 7.0 percent at the July 2026 Monetary Policy Committee meeting. That followed a 25-basis-point hike in May, leaving the real policy rate at roughly 2 percentage points.
The central bank has signalled that upside risks persist because of fuel price pressures, elevated services inflation, and rising inflation expectations. The tight stance is designed to contain those expectations, but it raises borrowing costs for firms and households.
The Bureau for Economic Research Inflation Expectations Survey shows average expectations for 2026 rose from 3.6 percent in the first quarter to 4.4 percent in the second quarter. Households expect prices to rise by 6.0 percent over the next 12 months and by 9.1 percent annually over five years.
A fragile real economy
The Absa Purchasing Managers’ Index fell from 50.8 in May to 47.3 in June 2026, signalling renewed contraction in manufacturing. The S&P Global South Africa PMI rose to 50.5 in June from 49.6 in May, but recorded two consecutive monthly declines in output and new orders.
The RMB/BER Business Confidence Index fell by 8 points to 39 in the second quarter of 2026, reversing first-quarter gains. The Agbiz/IDC Agribusiness Confidence Index fell four points to 45 in the second quarter, its lowest since the second quarter of 2024 and well below the neutral 50 level.
Composite consumer sentiment fell by 12 index points in the second quarter from the first. Firms in surveys link weaker sales to constrained client spending, economic uncertainty, and elevated price pressures.
The global energy shock and great-power angle
South Africa is a net importer of refined fuels, so the US-Iran war has translated into a cost-push shock. More money flows out to pay for energy while domestic industries face higher transport, power, and input costs.
The International Monetary Fund notes that the global disinflation trend has stalled, with world headline inflation expected to rise to 4.7 percent in 2026. Higher interest rates in advanced and emerging economies tighten financial conditions and raise the cost of capital for frontier markets like South Africa.
This dynamic forces the South African Reserve Bank to prioritise price stability over growth, a familiar trade-off in emerging markets. The result is a high risk premium on doing business in South Africa, even as July confidence edged higher.
For investors tracking the wider contest for resources and influence, the energy shock is a reminder of how distant conflicts reshape domestic policy. Our pillar Africa: The New Scramble follows these pressures across the continent.
What to watch next
The next inflation print will show whether the June spike was temporary or the start of a more persistent trend. If expectations keep rising, the South African Reserve Bank may face pressure to hike again despite weak growth.
Export-oriented sectors may benefit from a still-competitive rand, but energy-intensive and transport-reliant industries face persistent cost headwinds. Households, already squeezed by higher prices and borrowing costs, are likely to remain cautious.
The gap between business and household inflation expectations is a political risk. Trade unions expect inflation of around 4.7 percent over five years, giving them reason to push for above-inflation wage settlements that could entrench price pressures.
Frequently Asked Questions
What is the current South Africa business confidence index level?
The South African Chamber of Commerce and Industry business confidence index rose to 125.4 in July 2026, up from 123.5 in June.
Why is inflation a concern in South Africa right now?
Headline consumer inflation reached 5.0 percent in June 2026, above the South African Reserve Bank’s 3 percent target, adopted in November 2025, which allows one percentage point either side, driven mainly by transport costs and the global energy shock.
What is the South African Reserve Bank repo rate in July 2026?
The South African Reserve Bank kept its repo rate unchanged at 7.0 percent at the July 2026 Monetary Policy Committee meeting, after a 25-basis-point hike in May.
Connected Coverage
For more on how global energy shocks and great-power competition are reshaping African economies, read Africa: The New Scramble.
Sources
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