Business confidence fell to its lowest level in two years in the first quarter as rolling blackouts hit manufacturers and retailers in particular.
But sentiment among building contractors held up as businesses and households rolled out renewable energy and other load-shedding mitigation measures.
The business confidence index fell to 36 points in the first quarter of 2023 from 38 in the fourth quarter, said Rand Merchant Bank (RMB) and the Bureau for Economic Research (BER), which conducted the survey between February 8-27 .
The reading remained below the neutral 50-point mark since the third quarter of 2021, implying that most respondents in the surveyed sectors are unhappy with business conditions.
The survey covered 1,050 senior executives in the building, manufacturing, retail, wholesale and motor trade sectors.
“The deterioration in confidence is perhaps not surprising given the sharply escalated and persistent load-shedding in both January and February,” Absa economists said in a note.
“As of March 8 2023, SA has seen 129 consecutive days of power cuts, with the year-to-date load-shedding averaging stage 4.”
Manufacturing confidence crashed by nine points to 17 during the reporting period, hit by the frequency of power cuts and poorly run logistics infrastructure, according to the survey released on Wednesday.
The deterioration in sentiment occurred across various sub-sectors, all of which shared a common feature in falling domestic sales and production. Fixed investment to expand existing production capacity also suffered as demand weakened and capital expenditure budgets were increasingly absorbed by alternative energy generation measures.
“The low reading, with only 17% of respondents in the manufacturing sector confident, is an unusual outcome, and strongly highlights the deteriorated business operating conditions for manufacturers and high risk of further deindustrialisation,” said Investec chief economist Annabel Bishop.
“This is a severely negative outcome for SA, with the manufacturing sector typically providing better paid jobs than in the retail, wholesale and vehicle sales sectors, though these three industries are also showing business conditions are weak.”
Retail confidence also fell to 34 points from 42, as load-shedding reduced trading hours and increased operating costs due to diesel generators having to run more often.
However, building contractors’ confidence declined marginally from 46 to 43. The survey noted that confidence among subcontractors, particularly electricians, was high due largely to installation of backup power.
RMB chief economist Ettienne le Roux said that while improvement in the confidence of building subcontractors did not reflect in the headline RMB/BER business confidence result, the upsurge in installation of renewable energy and other load-shedding mitigation measures was a boon for the broadly defined building and civil construction sector.
Wholesaler confidence edged up from 37 to 40. New vehicle dealer confidence rose from 41 to 44.
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