The first business sentiment survey in SA after the formation of the government of national unity (GNU) shows business owners are cautiously optimistic about improving business conditions.
The RMB/BER business confidence index (BCI) for the third quarter of 2024 rose by three points to 38 after a five-point increase in the second quarter.
The three-point increase brought the composite RMB/BER BCI to the best level since the fourth quarter of 2022, when confidence was also at 38 points. At the current level, just under four out of 10 respondents were satisfied with prevailing business conditions.
The improvement in sentiment was likely supported by a continued absence of electricity supply disruptions with Eskom not having implemented load-shedding for more than five months and political certainty after the election, according to RMB.
The bank noted, however, with continued pressure on local consumers observed across the sectors and sluggish export demand noted by manufacturers there was not enough demand to fuel a faster uptick in sentiment.
“The widely anticipated interest rate cut in SA later this month, on the back of lower consumer inflation and a boost from the introduction of the two-pot retirement system should spur domestic demand through the remainder of the year. This should benefit sentiment, but logistical constraints remain top of mind and will need to be urgently tackled to support a sustained lift in business confidence,” said Isaah Mhlanga, chief economist at RMB.
In July, SA’s consumer inflation dipped below 5% for the first time in a year, easing to 4.6% from 5.1% in June.
The SA Reserve Bank last adjusted the repo rate in May 2023 when it raised the rate by 50 basis points (bps) to a 15-year high of 8.25%. Markets expect the Bank to start cutting rates in September, commencing with a 25-basis point cut, likely to be followed by a similar cut in November.
According to RMB retailers and new vehicle dealers showed an improvement in confidence with new vehicle dealers registering the biggest increase in confidence rising by 17 points to a one-year high of 27 points.
Despite the increase, the sector remained the most pessimistic with less than three in ten respondents satisfied with prevailing business conditions.
Vehicle manufacturers and importers association Naamsa reported earlier this week that August’s new-vehicle sales figures declined by 4.9% from a year ago. This was after a year-on-year improvement in July raised hopes that several months of market decline had finally ended.
After eight months of 2024, aggregate new-vehicle sales totalled 333,662 — which was 6.1% lower than 355,199 at the same stage last year.
RMB said the bump in confidence could indicate that the sector had “bottomed and is slowly recovering”.
“Moderating inflation and the associated reduction in policy interest rates should provide a boost to household disposable income and support the uptick,” RMB said.
With David Furlonger
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