Sacci on Wednesday warned that this uncertainty could stall gains made in the domestic business climate, particularly following a diplomatic spat that erupted after Trump signed Executive Orders that cut crucial funding for South Africa’s health programmes. File photo.
The South African Chamber of Commerce and Industry (Sacci) has raised alarms over a potential downturn in the country’s economic confidence, attributing the cause to shifting policies under the new administration of US President Donald Trump.
Sacci on Wednesday warned that this uncertainty could stall gains made in the domestic business climate, particularly following a diplomatic spat that erupted after Trump signed Executive Orders that cut crucial funding for South Africa’s health programmes.
The cutbacks have been linked to the government’s controversial land expropriation policy.
Survey results released on Wednesday indicated a slight dip in the Business Confidence Index (BCI), which fell to 120.0 points in January 2025, down from December’s 121.0.
While this represented the second consecutive month of decline, the index had previously achieved its highest level since February 2015, highlighting a period of upward economic momentum.
The downturn was primarily driven by lower export volumes; however, Sacci acknowledged positive contributions from stronger imports, increased vehicle sales, and a boost in tourist numbers, which all positively impacted confidence levels.
Sacci noted that the BCI had shown a steady upward trajectory since the formation of a more inclusive government administration in June 2024, rising from 107.8 in May 2024 to its peak of 121.0 in December 2024.
Despite the recent decline, the January 2025 figure still reflected a substantial increase of 12.2 points compared to the index in May 2024 and a 7.7 point increase from January 2024.
The recent report highlighted that increased tourist arrivals, enhanced new vehicle sales, and lower inflation figures have all played a pivotal role in positively influencing the BCI. Yet, the fall in merchandise export volumes has created a notable year-on-year negative impact.
While the general sentiment towards the future appears cautiously optimistic, Sacci cautioned that the new political landscape in Washington could introduce challenges, altering international relations and trade dynamics, which may lead to further uncertainties for South Africa’s economy.
“Under such circumstances, economic policy options and decisions should be carefully considered,” Sacci stated.
The International Monetary Fund (IMF) has described the global economic outlook as “divergent and uncertain”, projecting a growth rate of around 3.3% for 2025 and 2026, compounded with expectations that world headline inflation will only see a modest decline to approximately 4.2% in 2025 and 3.5% in 2026.
South Africa faces critical challenges, including a declining GDP per capita, rampant unemployment, poverty, and public debt that threatens macroeconomic stability.
Sacci emphasised the need for the government to implement structural reforms to navigate these economic hurdles and to foster an environment that encourages inclusive and sustainable growth.
“Foreign investors take note of a number of issues that could affect the return on investment in the future,” Sacci explained.
It also urged for a strategic focus on investment security, pricing transparency, and clarity in economic policy directions to prevent the perception of uncertainty.
Looking ahead, Sacci said the risks associated with geopolitical changes and rising protectionist policies could deter potential investors, necessitating greater efforts from the government to build confidence in both local and foreign investment circles.
“More ambitious reform implementation and sensitivity toward investor sentiment could stimulate fixed investment and revitalise growth,” Sacci continued.
With the overall representation in policy making improving in the global context, the goodwill towards South Africa is acknowledged. Nevertheless, the decisive moment for revitalising investor confidence hinges on measurable successful outcomes that will reassure both local and international stakeholders.
BUSINESS REPORT