The RMB/BER business confidence index (BCI) fell only marginally in the first three months, to 30 from 31, but it is well below the neutral level of 50 as all five categories of business confidence readings were depressed.
“Taking a slightly longer perspective shows a concerning picture as less than four out of 10 survey respondents were satisfied with prevailing business conditions for seven consecutive quarters,” said RMB’s chief economist and head of research, Isaah Mhlanga.
He said business conditions had deteriorated further in the first quarter.
“The same supply constraints, including load shedding, logistical challenges, and heightened global and domestic policy uncertainty, keep South African businesses in a stranglehold,” he said.
Another drag came from lacklustre demand, which was insufficient to sustain production and trade sales volumes at a higher level. A temporary surge in building activity also appeared to be fading, said Mhlanga.
Declines in sentiment in the retail and manufacturing sectors outweighed a 10-point improvement among new vehicle dealers.
Most businesses polled (70%) were dissatisfied with prevailing conditions and also their profitability, while manufacturers turned more pessimistic about investment and business prospects later in the year.
Investec chief economist Annabel Bishop said load shedding was not expected to improve much this year.
The first quarter to date saw Eskom’s EAF (energy availability factor) very low at just above 50%.
She said manufacturers’ confidence remained depressed, and indeed became more so, as demand weakened domestically and for South Africa’s manufactured exports.
She said the recently released VGBe Consortium report on Eskom coal power stations and grid facilities showed a poor situation for Eskom’s power generation.
She said the main drag on business confidence was retailer confidence, which fell -13% on a collapse of interest rate sensitive durable goods sales.
On a positive note there had been some improvement in shipping delays in the ports of Durban, Cape Town and Coega.
Bishop said also on the positive side the confidence of building contractors, wholesalers and new vehicle sales dealers improved in the first quarter. There might also be a moderate 0.3% quarter on quarter increase in GDP in the first quarter.
The flat economic trajectory in the first few months was also reflected yesterday in the BankservAfrica Economic Transactions Index (BETI) for February, which declined only slightly on a monthly basis and reached the same level as a year ago
The BETI level in February was 132.2, 0.8% down from January and a 1.2% improvement on the quarter ending November 2023.
The BETI reflected the impact of multiple economic challenges facing South Africa, among others load shedding, crippling logistical challenges at local ports and rising fuel prices.
“This inability of the economy to break out of its current growth profile does not bode well for the country’s unemployment crisis and socio-economic challenges,” Elize Kruger, an independent economist, said in a statement.
RMB said that in the compilation of the latest BCI, another noteworthy development was an acceleration in selling price inflation across the board.
“Except for retail, the increases were relatively muted, but it does signal that there is an upside risk to the inflation outlook,” RMB said.
BUSINESS REPORT