The Bureau for Economic Research (BER) at Stellenbosch University has conducted business tendency surveys for 70 years. These surveys provide vital indicators of economic trends long before official statistics are released. The surveys cover a range of questions about business activity, demand, selling prices, inventories, investment, and constraints hindering investment.
The key question is simple: “Are you satisfied with prevailing business conditions?” Respondents can only answer yes or no. Business sentiment often turns positive before any production growth is visible. Business owners can sense changes and show cautious optimism even when activity hasn’t picked up yet.
This sentiment provides clues about future investment intentions, potential economic growth, and job creation. Survey results show that business confidence often turns before the economy shifts upward to downward or vice versa. If South Africa’s business community is pessimistic, economic growth will unlikely accelerate.
Investment in new factories or workforce increases is improbable without favorable conditions.
Cautious optimism in business sentiment
The RMB/BER Business Confidence Index (BCI) compiles responses from manufacturers, retailers, wholesalers, new vehicle dealers, and main building contractors.
These sectors tend to lead the rest of the economy. Over the last ten years, manufacturers have consistently viewed the general political climate as a significant constraint on business conditions, more impactful than insufficient demand or short-term interest rates. However, the political climate constraint dropped sharply in the third quarter of 2024 following the formation of the national unity government.
The current RMB/BER BCI increased by three index points to 38 in the third quarter of 2024, the first survey after the new government’s formation. Results indicate a cautious optimism for future business conditions. For the first time since early 2022, a majority of respondents expect an improvement in business conditions over the next 12 months.
However, current harsh demand conditions have tempered a more robust recovery in sentiment. Since its inception in 1954, the BER has transitioned from manually collected surveys sent via post to electronic submissions. Despite changes in methodology, the representativeness and accuracy of the surveys have been maintained by weighting responses appropriately and following global best practices.
These surveys remain essential tools for understanding and forecasting South Africa’s economic pulse by providing early insights into business confidence.
