Migration protests and inflation to blame for dip in Durban business confidence

Business confidence in Durban slipped for a second consecutive quarter largely driven by changes in inflation and interest rates, geopolitical tensions, higher fuel prices, and migration-linked protests.

This is according to the latest Durban Business Confidence Index (BCI) compiled by Prof Harold Ngalawa and Dr Ntokozo Nzimande from the University of KwaZulu-Natal’s Macroeconomics Research Unit.

The index, based on quarterly responses from business executives and entrepreneurs in the greater eThekwini Municipality, dropped from 50.63 in the first quarter to 48.82 in the second quarter.

The index — an initiative of the Durban Chamber of Commerce and Industry NPC in partnership with the UKZN and the eThekwini Municipality — ranges from 0 to 100, where scores above 50 signal optimism, 50 represents a neutral outlook, and a rating below 50 indicates a lack of confidence in economic prospect.

The magnitude of this downturn could have been far more severe. The overall decline in the BCI was cushioned by sectors that registered tangible improvements in their business confidence indices, thereby preventing a steeper erosion of business sentiment.

—  Durban Business Confidence Index

The report found business confidence in Durban fell by 6.83% in the second quarter of this year compared to the second quarter of 2025, suggesting that businesses believe conditions are worse this year than they were a year ago.

“The magnitude of this downturn could have been far more severe. The overall decline in the BCI was cushioned by sectors that registered tangible improvements in their business confidence indices, thereby preventing a steeper erosion of business sentiment,” the report showed.

“These resilient pockets provided a vital counterbalance to the broader pessimism, ensuring that the index did not sink substantially deeper below the neutral zone.”

Notwithstanding this decline, the Durban index remains firmly above the national business confidence index. The national index compiled by the Bureau of Economic Research (BER) declined eight index points to 39 in the second quarter.

This suggests that the drop in Durban’s business confidence is largely driven by nationwide factors, including changes in the expected path of inflation and interest rates, geopolitical tensions, higher fuel prices and migration-linked protests.

While service delivery remains a challenge in Durban, the proportion of respondents who reported that, if they (or anyone) complained about poor service delivery, it is unlikely that the local municipality would address it within a reasonable time frame dropped to 71.2% from 77.4% in the previous quarter.

In the second quarter survey of business opinion in Durban, respondents cited roads as the worst service provided by the authorities (31.5%), followed by environmental management (sewerage, solid waste, and parks) (27.4%), water supply (26%), and public safety (police, fire, and ambulance) (13.7%).

Electricity remains the least of the service delivery concerns faced by the survey respondents (1.4%).

Following the suspension of load-shedding in March 2024, and with winter midway through, it is highly likely that power supply will continue uninterrupted, everything else remaining the same.

Confidence in the construction sector suffered the biggest loss, dropping by nearly 20%. The year-on-year picture is even bleaker.

Compared with the second quarter of 2025, business sentiment in the sector plunged by 41% in the second quarter of this year, suggesting worsening conditions with no signs of recovery in the short- to medium-term.

The community, social and personal services, and the transport sector, which is among the most susceptible to rising fuel prices, also dipped. This largely reflects the heightening geopolitical tensions and their impact on fuel costs.

The manufacturing sector’s index, the most essential sector for employment creation, shrank by 7% in the second quarter from a year ago. This decline reflects higher production costs driven by high fuel prices, among other factors.

Notwithstanding this, the manufacturing sector showed signs of improvement compared with the second quarter of 2025, suggesting that business conditions are far better than a year ago.

Agriculture, hunting, forestry & fishing lost about 10% in business confidence in the latest quarter, reflecting rising fertiliser prices and adverse weather conditions which were significant drivers of the decline in this sector’s business confidence.

The financial intermediation, insurance, real estate and business services sector, on the other hand, registered significant improvements in business confidence.

Wholesale and retail; repair of motor vehicles, motorcycles, personal and household goods; catering and accommodation also registered a slight improvement. Business confidence in the electricity, gas, and water supply sector also improved.

“We conclude that factors beyond the city level largely drove the drop in business confidence. These reflect the escalating, volatile tensions and the ongoing immigration protests,” the report said.

The dip in business confidence comes amid rising ratepayer, civic and political dissatisfaction of the city.

On Thursday the municipality’s electricity and energy directorate confirmed it was attending to a significant number of power outages.

“To expedite the restoration of electricity supply, additional technical teams have been deployed and are working around the clock to attend to reported outages. Every effort is being made to restore power to affected customers as safely and as quickly as possible.”

Last week about 50 contractors disrupted operations at the municipality’s water services depot in Pinetown by blocking the gates, demanding a meeting with officials over outstanding payment and new contracting processes.

This follows a similar downing of tools in April by contractors who say they are yet to be paid since December and that municipal officials have been ducking meetings with them.

The disruption resulted in at least two suburbs without water for several days.

The city said the latest challenge with the plumbers arose because of sabotage-related incidents after it implemented a new procurement model involving five main subcontractors.