There is near consensus among academics and businesspersons that the Business Confidence Index (BCI) contains valuable information about future investment growth owing to its predictive ability and superior forecasting power. The index serves as an early warning sign for the expected state of the economy, enabling policymakers predict economic expansions, contractions, and turning points. Effectively, economic growth, economic stagnation, and, to some extent, economic recessions or crises can be foreseen with a reasonable degree of accuracy.
The Durban BCI is computed from quarterly survey data on business conditions and expectations. It is based on responses provided by business executives and entrepreneurs in the greater eThekwini Municipality. This report presents the Durban BCI for 2025Q2. The index ranges from 0 to 100, where a score below 50 implies a lack of confidence in the Durban economy, a score of 50 indicates that the business situation is normal/neutral, and a score above 50 denotes confidence in the economy.
The Durban BCI continued to decline for a third consecutive quarter in 2025Q2. The index dropped by 7% to 52.40 points, down from 56.32 points in the previous quarter (see Figure 1). This suggests that businesses are becoming less optimistic about both current and future economic conditions in Durban. A closer look at the data reveals that the index decreased by 6% in the second quarter of 2025 compared to the same period in 2024.
Although the Durban BCI declined, it remains above the neutral zone and is significantly higher than the national BCI. The national index fell from 45 points in the first quarter of 2025 to 40 points in the current quarter. Therefore, it appears that the ongoing decline in the Durban BCI is likely driven by the national economic situation more than factors specific to Durban.
Figure 1: The Durban BCI
The reported index conceals significant sectoral differences across the economy. Four industries recorded improvements in the second quarter: wholesale and retail trade, construction, transport, storage and communication, and community, social, and personal services (see Figure 2).
Figure 2: Changes in business confidence by sector
Following a strong improvement 2025Q1, driven by favourable weather conditions, among other factors, business confidence in the Agricultural sector decreased by 51% in the second quarter. Confidence in the industry fell from 83.1 in the first quarter to 40.42 index points in the second quarter. This decline is mainly attributed to increased global uncertainties and animal diseases, which have adversely affected production and market stability in the animal husbandry sub-sector. Confidence in the agricultural sector, however, was 1% higher in 2025Q2 than in the corresponding quarter in 2024.
Manufacturing experienced a sharp decline in business confidence during the second quarter of 2025. Confidence in this sector declined from 61.71 to 41.82 between the first and second quarters, representing a 32% decrease. Year-on-Year (Y-o-Y), the manufacturing confidence index worsened by 18%, indicating that expectations for the sector are worse than they were in the same period in 2024. The ongoing global trade uncertainty, weak domestic and global demand, high operating costs, infrastructure constraints, and logistical inefficiencies continue to be the main causes of this deterioration. The financial intermediation, insurance, real estate, and business services sector experienced a 2% contraction, declining from 54.85 in the first quarter of 2025 to 53.52 in the second quarter. This implies that confidence in this sector was 0.96% lower compared to the same quarter in 2024.
Business confidence in the electricity, gas, and water sector was significantly low in the second quarter of 2025. While load-shedding, which has been cited as a primary concern in previous quarters, remains suspended, the lingering fear of its return, especially with the cold winter that has been recorded this year, could be dampening confidence in the sector. Other issues, such as aging infrastructure, increasing production costs, and climate risks, coupled with subdued economic growth, may explain the reported low confidence in the electricity, gas, and water sector.
The wholesale and retail trade, repair of motor vehicles, motorcycles, and personal and household goods, as well as catering and accommodation, recorded a 13% improvement in business confidence in the second quarter of 2025, from 43.79 in the previous quarter to 49.63 in the quarter under review. This is largely due to improvements in the cost of living, with inflation falling below the target range, coupled with the recent interest rate cut. However, this is countered by the increasing tax burden and the recent increase in the prices of petroleum products.
The Transport, Storage, and Communication Sector recorded a 6% improvement in confidence, rising from 58.89 in the first quarter of 2025 to 62.13 index points in the second quarter of 2025. This increase is attributed to improved land cargo and air transport operations. However, Y-o-Y confidence declined by 9%, suggesting that business conditions in 2025Q2 are worse than in the same quarter of 2024. The Community, Social, and Personal Services Sector demonstrated resilience, with business confidence improving by 19% in the second quarter of 2025 relative to the first quarter, rising from 50.30 points to 59.99 points. The industry also experienced a 19% increase in business confidence in 2025Q2 compared to the same quarter in 2024.
Overall, the Durban BCI fell by 7% in 2025Q2. However, it remains above the 50-point mark, indicating that although business confidence has deteriorated, investors in Durban remain optimistic. We argue that the decline in sentiments about the City’s economic climate could be attributed to deteriorating national economic conditions, rather than factors specific to Durban. These factors include heightened geopolitical tensions, global trade uncertainty, and dynamics within the domestic political landscape (e.g., conflicts in the Government of National Unity (GNU)). This deterioration may have devastating implications for investment, growth, and unemployment in Durban.
Poor service delivery continues to be a concern for businesspeople in Durban. The Survey of Business Opinion used to compute the Durban BCI for 2025Q2 reveals that 71.4% of the respondents (up from 70% in the previous quarter) reported that if they (or anyone) complained about poor service delivery, it is unlikely that the local municipality would deal with it within a reasonable time frame. This indicates that most survey participants lack confidence in the municipality’s ability to respond to service delivery concerns promptly, underscoring the need for improvements in service delivery and complaint handling. The respondents identified environmental management (sewerage, solid waste, and parks) (28.6%) as the poorest service, followed by roads (26.8%), water (23.2%), public safety (police, fire and ambulance) (12.5%) and electricity (8.9%), in that order.
South Africa’s Y-o-Y real GDP growth declined marginally from 0.9% in 2024Q4 to 0.8% in 2025Q1 (see Figure 3). Quarter-on-Quarter (Q-o-Q), the economy grew by a meagre 0.1% in 2025Q1 compared to 0.6% in the previous quarter. Agriculture made the largest contribution to the country’s growth during the quarter (15.2%), followed by transport (2.4%), wholesale and retail trade (0.5%), and the financial sector (0.2%). Several sectors contracted, including mining and quarrying (4.1%) and manufacturing (4.1%). The dismal economic performance may partly be attributed to policy uncertainty, international trade volatility, and the recent tariff adjustments by the US. In KwaZulu-Natal, the Y-o-Y GDP growth rate rose by 3 percentage points in 2025Q1. Q-o-Q, however, it remained unchanged at 0.4%, compared to 0.1% at the national level during the quarter.
The monetary authorities continue to keep inflation under control. In May 2025, the rate of inflation as measured by year-on-year percentage changes in the all-items national composite consumer price index remained steady at 2.8%, below the 3-6% target range (see Figure 4).
The 2.8% increase in the May 2025 general price level was largely driven by inflation in food and non-alcoholic beverages (4.8%), housing and utilities (4.5%), alcoholic beverages and tobacco (4.3%), restaurants and accommodation services (1.8%), personal care and miscellaneous services (1.7%) and clothing and footwear (1.3%). The transport sector, on the other hand, experienced a disinflation of 4.8%.
Despite inflation rates remaining below the target band for three months now (March April and may), the South African Reserve Bank continued to exercise caution during the quarter under review. On 29 May 2025, the bank’s Monetary Policy Committee adjusted the repo rate downwards by a marginal 25 basis points from 7.5% to 7.25% effective the following day (see Figure 5). Given the economy’s poor performance and relatively low and stable inflation rates, conventional wisdom suggests that the repo rate should indeed be on a downward trend. However, while this has been the case, the central bank has been slow to reduce the repo rate, probably due to uncertainties in key fundamentals driven by geopolitical tensions in many parts of the world.
The South African rand (ZAR) continued to strengthen against the United States dollar (US$) in the second quarter of 2025. The rand gained 3.33% against the US$ during the quarter under review, appreciating from ZAR18.3673/US$ at the beginning of the quarter to ZAR17.7758/US$ at the end of the quarter (Figure 6). During the same period, the rand depreciated by 2.51% against the British Pound Sterling (GBP) and by 4.70% against the Euro, falling from ZAR23.7398/GBP to ZAR24.3502/GBP and from ZAR19.8542/Euro to ZAR20.8323/Euro, respectively.
The rand’s strong performance against the US$ has primarily been due to the US’ weak fiscal position. It is expected that the US government revenue collections will remain uncertain and the fiscal deficit will stay high in the foreseeable future, given the fluctuations in tariffs and ongoing global trade tensions.
Figure 3: South Africa’s annual real GDP growth rates
Figure 4: South Africa’s Inflation Rates
Figure 5: South Africa’s Interest Rates
Figure 6: ZAR/USD exchange rates
