UNDER the Level 4 lockdown rules, some shops are allowed to open while others remain closed. Business for South Africa says the country needs to move back to full economic activity as quickly and as responsibly as possible.     African News Agency (ANA)
UNDER the Level 4 lockdown rules, some shops are allowed to open while others remain closed. Business for South Africa says the country needs to move back to full economic activity as quickly and as responsibly as possible. African News Agency (ANA)

Business activity falls to record low

By Siphelele Dludla Time of article published May 7, 2020

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JOHANNESBURG - Private sector activity in South Africa fell to a record low last month as one of the country’s largest business lobby organisations, Business for South Africa (B4SA), called for the acceleration of the phased reopening of the economy to prevent it from shrinking by as much as 17percent, according to its forecasts.

The IHS Markit’s Purchasing Managers’ Index (PMI) yesterday tumbled to its largest one-month fall, posting the lowest reading since July 2011.

The PMI tumbled to 35.1 in April from 44.5 in March as output levels collapsed due to company closures and falling demand.

B4SA said the government needed to increase the opening of the economy to avert a disaster.

B4SA’s Martin Kingston said the country needed to move back to full economic activity as quickly and as responsibly as possible.

“We need to accelerate the restart of the economy to minimise hardship, hunger and desperation,” Kingston said.

“These factors could threaten the rule of law and weaken South Africa’s capacity to respond to the impact of the Covid-19 pandemic.

“We have every reason to believe that a safe return to work will be successfully achieved,” he said.

The IHS said activity fell at well over half of all surveyed firms, as working-from-home policies also led to weaker output.

It said the survey found that purchases fell steeply in April, although input costs rose at an accelerating pace, mainly due to a broad-based increase in import prices as the rand weakened further against the dollar.

The IHS said its survey found that firms lowered employment numbers in April, leading to an unprecedented drop in workforces.

On Tuesday, the South African Revenue Service (Sars) disclosed that more than 20000 workers lost their jobs in April as firms closed shop, just days after Absa on Monday said its PMI crashed to an all-time low as the manufacturing industry virtually ground to a halt in April.

Absa said its PMI dipped to 46.1 points in April from 48.1 points in March, moving the data further from the benchmark-level of 50 points, which separates expansion from contraction.

IHS economist David Owen said the sharp decline testified to the impact that the nationwide lockdown has had on the economy.

Owen said the headline index may even be an overestimate of business performance in April, and the actual figures may be worse than thought.

“With the lockdown in place, many firms simply shut down operations, rather than partially reducing output,” he said.

“As a result, the magnitude of the collapse in economic activity could be even more cataclysmic than the index suggests, with jobs and revenues set to suffer greatly as well,” Owen warned.

BUSINESS REPORT 

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