Local business confidence fell for the fifth straight month and to its lowest level since the height of the Covid-19 pandemic, as SA’s ongoing power crisis weighs on profitability, according to the latest Rand Merchant Bank (RMB)/Bureau for Economic Research (BER) business confidence index (BCI).
The index fell by nine index points from the first quarter to 27 in the second quarter of 2023, coming at levels last seen in 2020. That suggests that only about one in every four respondents were satisfied with the prevailing business conditions.
Respondents in different sectors said load-shedding was hurting production capacity, pushing up costs and hurting profitability, while any extra money was being spent on mitigating the effects of rolling blackouts, such as installing solar power.
RMB chief economist Isaah Mhlanga said it remains unclear what will “meaningfully” lift short-term confidence as load-shedding is expected to become worse over the winter months.
“While just skirting a recession in the first quarter of 2023, the South African economy is far from being out of the woods. Indeed, more concerning is the fact that consecutive quarters of business confidence below 30 have historically coincided with contractions in either fixed investment, economic growth, or both,” he said.
“However, some of the drivers of negative sentiment such as strained geo-diplomacy could be resolved in the coming months while current constraints on business conditions such as load-shedding could look somewhat better in 2024 and may support an improvement in confidence over time,” he added.
The gloomy sentiment was shared among most respondents, as three of the five sectors reported dwindling confidence and two remained unchanged.
Consumer-facing new-vehicle dealers reported a fall in confidence of 21 index points quarter on quarter to 23; a drop of 14 points among the retail sector to 20; and a drop of eight points among wholesale traders to 32.
“Finally, the drop in the overall RMB/BER BCI would have been more pronounced were it not for the business confidence of building contractors remaining unchanged at 43 index points,” RMB and BER said.
The survey was conducted among 1,050 senior executives in the building, manufacturing, retail, wholesale and motor trade sectors from May 10-30.
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