The Business Confidence Index for the second quarter rose from 69 points three months earlier to 71, its highest level since early 1989.

The Bureau for Economic Research and the Rand Merchant Bank, the survey's authors, said the figures signalled that growth would hold up this year.

However, they warned higher oil prices could dampen the mood this summer.

"Business confidence could taper off somewhat in the third quarter given recent sharp increases in the fuel price," they said in a statement.

Rate rise risk

They added that interest rate rises, widely expected to take effect before the end of the year, could limit business optimism further.

Borrowing costs in South Africa are currently at a 22-year low after the central bank slashed its base rate by 5.5 percentage points last year to 8%.

But the bank is widely expected to raise rates again in the months ahead in order to choke off resurgent inflation.

The latest survey, based on interviews with 3,000 executives, showed that confidence rose across four of the five major economic sectors.

Optimism was up in manufacturing, retail, wholesale, and construction, with only vehicle trade registering a decrease.

The increase in manufacturing confidence reflected the sector's emergence from recession in the first three months of the year.

The recovery in manufacturing helped lift overall economic growth for the first quarter to 3.1% from 1.3% during the previous three months.

The survey's authors said peaceful general elections in April, government plans to increase spending on infrastructure, and South Africa's victory in the race to host the 2010 football World Cup, had all helped to lift the mood.