Business confidence fell across all the five sectors of the index, with retail experiencing the biggest decline from 50 points to 37 points. Picture: Zanele Zulu/African News Agency (ANA)
Business confidence fell across all the five sectors of the index, with retail experiencing the biggest decline from 50 points to 37 points. Picture: Zanele Zulu/African News Agency (ANA)

Business confidence in SA in contractionary territory

By Siphelele Dludla Time of article published Mar 10, 2021

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JOHANNESBURG - BUSINESS confidence in South Africa has remained in contractionary territory this year in spite of the passing of the second wave of Covid-19 infections and less pronounced load shedding.

The Rand Merchant Bank (RMB)/Bureau for Economic Research (BER) today released its Business Confidence Index (BCI) for the first quarter of 2021.

The BCI continued to highlight the fragility of the economic recovery, declining from 40 to 35 in the first quarter of 2021.

The first quarter survey covered about 1 300 businesspeople mainly during the second half of February when level 3 lockdown restrictions were lifted.

RMB/BER said a strong majority of respondents remained worried about the subdued nature of activity in most of the sectors covered, but especially in manufacturing and construction.

Close to seven out of 10 senior executives expressed their dissatisfaction with prevailing business conditions, up from six previously.

Confidence fell across all the five sectors of the index, with retail experiencing the biggest decline from 50 points to 37 points.

It was followed by manufacturing confidence which declined from 31 to 25, and new vehicle dealers while sentiment among building contractors and wholesale traders deteriorated slightly.

Except for the wholesale trade, confidence in every other sector remained well below the 50-point neutral level.

However, at 35 the RMB/BER BCI has seen a notable improvement.

It is a good 30 points higher than the slump in confidence to a low of 5 points seen during the height of the lockdown in the second quarter of last year.

RMB chief economist Ettienne le Roux, however, said it would not take much to blow the recovery off course.

Le Roux said other factors with potentially the same effect would be a significant third wave of Covid-19 infections resulting in some lockdown restrictions being reinstated, and power outages intensifying again later in the year.

“Such underlying dynamics are not reflective of a robust economic upswing. On the contrary, it talks to one that is rooted in a fragile foundation,” le Roux said.

“Against such an uncertain backdrop, the best contribution the government can make is to fulfil its promises of confidence-inspiring economic reform focused on the private sector becoming the key driver of GDP (gross domestic product) growth.”

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BUSINESS REPORT

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