South Africa business mood slips as Iran war upends rate outlook
2 min readSouth African business sentiment weakened in the second quarter as consumers faced fresh pressures from the Iran war that’s clouded the outlook for inflation and interest rates.
The quarterly business confidence index compiled by FirstRand’s Rand Merchant Bank and Stellenbosch University’s Bureau for Economic Research dropped eight points to 39 in the three months through June, according to a report published Tuesday. That’s the weakest level since the third quarter of 2025, the data shows.
While the decline in the reading was broad-based, it was largely dragged down by consumer-facing industries, the lender said.
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“The moderation comes against a shift in the global backdrop, as escalating Middle East tensions have driven higher oil prices and reshaped interest-rate expectations, prompting businesses to reassess the outlook,” the lender said.
South Africa’s Reserve Bank last week raised borrowing costs by 25 basis points to 7% — the first hike in three years — as it flagged intensifying inflationary pressures. Policymakers also signaled that further monetary-policy tightening will be warranted if the war drags on, while assuming that in the worst-case scenario, the policy rate would increase by at least a further 75 basis points by the third quarter of this year.
Since the US and Israel attacked Iran on Feb. 28, oil prices have surged by a third, pushing domestic gasoline prices to a record high.
“Businesses have had to adjust quickly to a less-supportive outlook, which weighed on sentiment across most sectors,” said Isaah Mhlanga, chief economist at RMB. “Many respondents indicated that uncertainty had increased and that clients had become more cautious about spending and investment decisions.”
Any improvement in sentiment will depend on geopolitical tensions easing, oil prices stabilising and more certainty about the outlook for interest rates, he said.
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