Business confidence in South Africa has plunged to its lowest in 18 months dragged lower by the Russia/Ukraine war, the devastating floods in April and rotational power cuts in May.
The SA Chamber of Commerce and Industry (Sacci) Business Confidence Index (BCI) recorded 89.3 points in May, its lowest level since the 85.7 points in September 2020.
Sacci said the BCI declined from 95.6 points in March to 93.7 points in April, and then further to 89.3 points in May.
Sacci said that South Africa had already been feeling the impact of disruptions besetting the world economy while local incidents exemplified and added to structural domestic economic challenges.
However, Sacci economist Richard Downing said it appeared that the health effect of the Covid-19 pandemic had largely waned while the scrapping of the national state of disaster and the easing of regulations had substantially freed up the economy.
“This could further improve the economic environment as reflected by the latest gross domestic product (GDP) data,” Downing said.
“However, it might take a while for the economy to gain momentum from the structural economic disruptions that followed the lockdown regulations.”
Recently released GDP data indicated that the economy rebounded to pre-pandemic levels in the first quarter of 2022, rising by 1.9 percent boosted by the manufacturing sector.
However, information lags, changes in expectations and the dynamics of the business mood are at times at variance with real economic developments.
The average of 95.5 points for the BCI in the first quarter of 2022 was 1.2 index points higher than the average for the corresponding period in 2021.
Although the general trend in business confidence during the first three months of 2022 was positive and in harmony with improved economic activity, Sacci said a more negative sentiment in the business climate occurred in April and May.
The BCI lost 6.3 index points between March and May, and was 7.7 index points lower in May 2022 than in May 2021.
Sacci said the decline of the All-Share price index on the JSE reflected some uncertain business perspectives and expectations while the inconsistency of energy supply further weighed on the overall business mood.
It said the BCI for April and May also confirmed a medium-term (year-on-year) negative sentiment.
Downing said that it might take a while for the economy to recover and gain momentum given prevailing global economic conditions and structural economic challenges that followed on the lockdown regulations.
“Although some challenges lie beyond the scope of the public and/or the private sector, attention should be paid to those issues that could be corrected and thus support and enhance economic performance,” he said.
“Investor confidence/trust and the business climate should be the foremost objective to drive economic growth and employment.”
BUSINESS REPORT