Business confidence fell to its lowest level in nine months in July, when violence and looting spread across the economic hubs of KwaZulu-Natal and Gauteng and SA contended with harder lockdown restrictions.
The latest SA Chamber of Commerce and Industry’s (Sacci) business confidence index released on Wednesday fell to 93.2 points — its lowest level since October — as the unrest and tougher shutdown put the breaks on a slow but steady recovery in business conditions.
The gauge throws more light on the effect the unrest has had on the country as it tries to regain ground lost due to the Covid-19 pandemic.
Economic growth shrank 7% in 2020, and though it is expected to come back from this low, the violence is a setback for a country that was already battling low fixed-investment levels. Business confidence is a necessary ingredient for investment, which is needed to boost growth and create jobs.
The gauge’s decline of three points between June and July was, however, not as sharp as the 19.8 point plummet reported when SA went into a level 5 lockdown between April 2020 and May 2020.
“However, the recent short-term decline in business confidence could compound and upset investor confidence over the longer-term,” the chamber said in a statement.
July’s dip “suggests a more muted and limited effect” on the overall business climate in the country, it said, adding that the “mobilisation and collaboration of the private sector and civil society in supporting law enforcement to protect property [and] business and community infrastructure was unprecedented.”
The violence has, however, set back several positive trends recorded in the BCIs sub-indices since its trough of May 2020 — including a 10% rise in the rand exchange rate, a 40% rise in merchandise export volumes and a 15% rise in the dollar price for gold and platinum.
“The spate of looting and destruction during July in certain areas of SA, whatever the intention, was a setback to economic objectives like inclusivity, growth and job creation,” the chamber said.
It also exposed the government’s inability to act timeously and decisively in a crisis.
“Subsequent actions have nevertheless corrected the situation and similar events of this nature are unlikely to happen as a result of the measures implemented to prevent future occurrences,” it said.
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