Business confidence in South Africa could stay depressed for a prolonged period as it remained in the contractionary territory in the fourth quarter amid concerns over recurrent power cuts and rising inflationary pressures, mainly due to intensifying supply chain issues. Photo: Free Images
Business confidence in South Africa could stay depressed for a prolonged period as it remained in the contractionary territory in the fourth quarter amid concerns over recurrent power cuts and rising inflationary pressures, mainly due to intensifying supply chain issues. Photo: Free Images

Business confidence in the country remains on a subdued level

By Siphelele Dludla Time of article published Nov 25, 2021

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Business confidence in South Africa could stay depressed for a prolonged period as it remained in the contractionary territory in the fourth quarter amid concerns over recurrent power cuts and rising inflationary pressures, mainly due to intensifying supply chain issues.

The RMB/BER Business Confidence Index (BCI), released yesterday remained unchanged at 43 index points in the fourth quarter after falling from 50 points in the third quarter.

The BCI reading has been struggling to rise above pre-pandemic levels as it has never been above 50 points that separates contraction from expansion since 2015.

RMB/BER said the outcome could easily have been better were it not for a variety of special factors that kept sentiment subdued.

It said the third wave of Covid-19 infections, the civil unrest in July, transport delays, shortages of inputs and insufficient stocks all hit confidence hard in the third quarter.

The prolonged metalworkers’ strike in October and its impact on business activity, and load shedding, had also prevented sentiment from recovering in the fourth quarter.

RMB chief economist Ettienne le Roux said that existing supply chain disruptions and stock shortages intensified during the period.

Le Roux said that except for building contractors, confidence in the fourth quarter declined in all the remaining sectors.

The building confidence jumped from 18 points to a still-low 30 points in the fourth quarter as improved sentiment among smaller contractors in KwaZulu-Natal stood out.

Le Roux said confidence could easily have increased in the fourth quarter thanks to a slight improvement in the composite activity indicator also derived from the survey results.

“It is a pity that various unfavourable external as well as domestic shocks prevented this from happening,” he said.

“Unfortunate too is the likelihood that supply chain disruptions, insufficient stocks, load shedding and escalating cost increases will prevail for a while longer, so dimming the hopes of a further strong recovery any time soon.”

The fieldwork for the fourth quarter RMB/BER survey took place during the first two weeks of November covering 1 300 senior executives in the building, manufacturing, retail, wholesale and motor trade sectors.

Retail confidence declined marginally from 56 to 52 points and wholesale confidence from 55 to 53 points, the only two sectors where confidence has exceeded the neutral 50-mark.

Manufacturing confidence fell from 41 to 38 points as a string of factors dampened confidence.

New vehicle trade confidence also sagged further from 47 to 41 points, mainly as new vehicle dealers also suffered from insufficient stocks.

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