The South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) declined further by 7.7 index points in April before recovering by 0.5 index points to 124.1 in May.

The BCI was also 8.3 index points higher in May this year than in May 2025. The BCI averaged 129 in the first five months of this year, compared with the average of 120 in the first five months of 2025.

Between March and April, Sacci says, the decline of 7.7 index points was considerable.

It appears, however, that the negative sentiment caused by the recent soaring crude oil price subsided somewhat in May.

Sacci says the most notable positive impact on the BCI in May was made by new-vehicle sales, merchandise export volumes and to a lesser extent by merchandise import volumes.

It notes that a substantial negative impact on the BCI was made by the decline in overseas tourists while higher inflation’s negative contribution is also of concern.

Despite short-term volatility and downward correction, the Sacci BCI remained a significant 8.3 index points higher year-on-year. It was only higher inflation and high energy prices that marginally affected business confidence negatively when compared with May 2025.

In the short term (month-on-month), Sacci says, the broad financial climate has become negative and tougher during May, while real economic activity was positively leaning.

Over the medium term (year-on-year), it was only energy costs and price instability (inflation) that affected the business climate adversely.

Sacci explains that the domestic economy continues to be affected by the consequences of the war in the Middle East.

It notes that improved ratings regarding South Africa’s creditworthiness and investment, and a stricter South African Reserve Bank monetary policy stance with the bank’s latest decision to increase the repo rate by 25 basis points, were in the best interest of economic stability and progress.

“In general, a more positive view of economic prospects was expressed by rating agencies. These views mainly hinged on fiscal consolidation, declining public sector debt levels and debt servicing,” says Sacci.

“The problem is that inflation is a process and that the spark led by fuel prices as a basic input to all economic activities will kindle the inflation process and must be contained coming from whatever source.”

Sacci says the impact of the high crude oil price for South Africa was softened by a steady rand exchange rate, especially against the dollar.

The steady rand and government’s lowering of the fuel levy helped to reduce the effect of fuel price increases, restrain inflationary pressure and acted as less of a drain on the economy.

Although the exchange rate and volatility of the rand, share prices, precious metal prices and credit availability play important roles in business sentiment and business confidence, Sacci says these indicators reflect expectations rather than lasting economic substance.

The dip in Sacci’s BCI since March occurs when business expectations change and exogenous developments dent sentiment.