South Africa's business sector is coming under increasing pressure as higher fuel and energy costs, partly linked to the escalating conflict in the Middle East, begin to weigh on the domestic economy, according to the latest business survey by the South African Chamber of Commerce and Industry.
In a television interview discussing the survey, SACCI economist Richard Downing said businesses are concerned about what he described as “price volatility”, with respondents pointing to rising oil prices, domestic electricity rates and widespread uncertainty in global trade as key factors clouding the outlook.
The findings show that although headline consumer inflation has remained relatively contained so far, underlying pressures on companies are intensifying. Businesses are grappling with higher input costs, weak sales volumes, soft new orders and growing hesitancy over hiring, suggesting the stress is extending beyond margins and into broader economic activity.
“Our survey respondents really indicated that they are quite troubled by price movements and price volatility,” Downing said. He said the war in the Middle East is a major contributor to the current circumstances, although not the only one.
Domestic power prices are also under increasing pressure, he said, adding to the impact of the cost of imported fuel on an economy already struggling with weak growth and high unemployment. According to Downing, businesses are seeing these cost pressures reflected in inflation trends, with inflation rising from 3.1% to 4% in April, reinforcing concerns that pricing volatility is becoming stronger.
The survey points to an increasingly pessimistic business environment, with pressures increasing not only in the retail sector but across the wider commercial ecosystem. Downing said that price volatility ultimately affects the “real economy” by reducing consumer spending power, reducing sales volumes, and reducing trust between companies.
This will have a significant impact on the coming six to 12 months. As households bear higher transportation and energy-related costs, discretionary spending is likely to weaken, further hurting retailers already struggling with lower demand. Downing said South Africa's high unemployment rate remains the first major structural hurdle, limiting consumer flexibility and making the retail sector particularly vulnerable if current conditions persist.
At the same time, the international trade scenario is also becoming fragile. Downing said global commerce is being impacted by continued uncertainty over the direction of the world economy, as well as disruptions related to tariffs, which are “being added and removed and added again.” This volatility is impacting trading volumes and contributing to caution among companies exposed to global markets.
One offsetting factor has been the rand's relative resilience, he said. The South African currency has held up better than expected against major global currencies, providing some support to price forecasts and helping to limit the severity of imported inflation. Downing suggested that if the rand were materially weaker, the cost environment could be significantly worse.
Still, the survey's employment indicators underscore how quickly business caution is spreading. Downing highlighted a sharp decline in expectations for hiring over the next six months, saying the employment expectations index had fallen from 56% to around 40. This decline suggests that companies are becoming more defensive due to rising cost pressures and softening demand.
The slowdown in hiring is particularly important because it points to second-round economic effects. Weak business confidence could strengthen already sluggish economic momentum, especially if companies delay expansions, reduce inventory accumulation or trim payroll plans in response to uncertain business conditions.
Downing said the stress isn't limited to the retail sector. International trade remains a key component of South Africa's broader business environment, and any prolonged deterioration in global conditions could impact profitability and business sentiment. With new orders and sales volumes weak, the impact is likely to be felt first on consumer demand and logistics-related sectors.
From a policy perspective, Downing argued that the most durable buffer against external shocks is strong economic growth. In his view, South Africa needs a reliable environment that supports production, entrepreneurship and investment in the long term. He said investor confidence is essential, especially as investors assess the country's trajectory in the future rather than reacting only to short-term fluctuations.
“If you implement all those things and create a policy environment that people trust, you can generate 3% to 4% growth per year,” he said, which in turn could support employment, improve inflation and help stabilize prices.
He also stressed the importance of inflation control, noting that the South African Reserve Bank's efforts to control price pressures remain important. But he cautioned that external shocks such as war-induced oil price increases and rising electricity tariffs are not conducive to an environment of confidence or sustained growth.
The overall message of the SACCI survey is that South Africa's business sector is not yet facing a full-blown inflation crisis, but it is clearly operating in a more difficult and uncertain landscape. At the moment, the combination of increased energy costs, weak demand, soft orders and deteriorating employment expectations is weighing on sentiment and posing a risk of macroeconomic underperformance.
If geopolitical tensions remain elevated and domestically administered prices continue to rise, businesses may face prolonged pressure – which could test both consumer resilience and the country's already fragile growth outlook.