SA businesses expect input cost pressures to persist over the next six months aggravated by looming electricity tariff increases and the cost of alternative energy sources due to persistent load-shedding.
That’s according to the SA Chamber of Commerce and Industry (Sacci), which on Wednesday published the results of a survey measuring business sentiment on prevailing trade conditions and expectations for the next six months.
Higher input costs featured as one of the big bugbears for businesses in 2022 as the result of the of overhang of the Covid-19 pandemic and the war in Ukraine, setting off historic increases in global energy prices that have since eased somewhat.
Still, SA businesses will be further squeezed by an 18.65% increase in electricity tariffs from April. The higher cost of power means the share of energy in intermediary inputs will increase from 24% to 38% in gold mining, from 22% to 37% in iron ore mining, and from 13% to 19% in the platinum group metals (PGMs) sector, Minerals Council SA said last week.
Eighty-seven percent of respondents in the Sacci trade survey foresee a rise in input costs, which will push up prices and place even more strain on cash-strapped consumers.
The rise in operating costs could also weigh on the extent to which businesses are able to hire workers.
Yet at least 42% of respondents of the Sacci survey, conducted in November and December, were positive about prevailing trade conditions. However, if seasonal factors are taken into account, 47% were positive in November and 53% in December.
Merchandise export trade, new vehicle sales and trade with neighbouring countries (Botswana, Lesotho, Namibia and Eswatini) were positive.
However, retail trade declined while the construction industry and the property market experienced lower activity.
Overall, businesses expect trade conditions to improve over the next six months, save for input costs.
“It is not a good picture at the moment. The survey was done before load-shedding worsened,” said Sacci economist Richard Downing. “Input costs also are a big issue for traders. Although inflation eased a bit, it’s still high and any further increase in interest rate will increase the cost of capital for businesses.”
Sacci said higher inflation and the rise in interest rates in 2020 in particular left households with less discretionary income, and salary and wage increases in the private sector could not keep pace with inflation.
Businesses were also finding it harder to remain viable given cost pressures, it added.
Update: January 18 2023
This story contains additional comment from Sacci
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