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Business Confidence in South Africa improves in Q3

Business Confidence in South Africa improves in Q3

JOHANNESBURG: Business confidence in South Africa saw a marginal increase in the third quarter of the year but still remained in a subdued territory with seven out of the ten respondents having remained unsatisfied with business conditions in the country.  This is according to the Rand Merchant Bank/Bureau Economic Research Business Confidence Index (BCI) released today.  The BCI increased by 6 points to 34 points after plunging from 40 to 29 in the second quarter- its lowest level since the 2009 financial crisis. RMB chief economist Ettienne le Roux today said that while the small increase in the quarter is encouraging, the improvement must be seen in the broader context of continued weak domestic demand, subdued business activity, low profitability heightened political uncertainty.  “This is not the environment in which the economy is about to experience a resurgence. In fact, the more likely scenario is one where GDP growth remains stuck at around 1 percent over the short to medium term, hamstrung by lacklustre private sector fixed investment and jobs growth,” le Roux says.

The BCI is made up of five sectoral indices, namely that of manufacturers, building contractors, retailers, wholesalers and new vehicle dealers. The BCI in the quarter under review saw sentiment improve both in the manufacturing and the motor trade from the heavily depressed levels recorded in the second quarter- with confidence among manufacturers rebounding from 16 to a still low 27. New vehicle dealers’ confidence bounced back, rising from 11 to 19 in the third quarter as sales volumes saw an uptick. Building confidence rose from 36 to 44, while retailer’s confidence edging up from 35 to 38 and the wholesale sector confidence declined just one index point to 48.  Business confidence can vary between 0 and 100, where 0 indicates an extreme lack of confidence, 50 neutrality, and 100 extreme confidence. Macroeconomics website Trading Economics said that Business Confidence in South Africa averaged 44.76 from 1975 until 2017, reaching an all time high of 91 in the third quarter of 1980 and a record low of 10.20 in the third quarter of 1985. Roux says tinkering around the policy edges is no longer an option if business confidence in the country was to show a marked improvement.  “In this regard, concrete moves towards effectively governed state owned enterprises, skills advancement and quality education, improved immigration policies and less red tape, to name but a few measures, would be a good start.”