The RMB/BER Business Confidence Index rose to 26 points in the fourth quarter from a 20-year low of 20 points in the third quarter. Photo: Reuters
JOHANNESBURG – Business confidence has shown the first sign of improvement in two years, but an economist has warned that it remained consistent with an economy “bumbling along in near recession-like conditions”.

On Wednesday, the the Bureau for Economic Research (BER) reported that the RMB/BER Business Confidence Index (BCI) had risen to 26 points in the fourth quarter from a 20-year low of 20 points in the third quarter.

It said confidence rebounded in three of the five sectors making up the BCI: building, manufacturing and retail trade. It declined in new motor trade and remained essentially unchanged in the wholesale trade sector.

However, RMB warned that although the fourth-quarter rebound was encouraging, some realism was necessary: the improvement was a mere 5 index points and not broadly based across sectors. Moreover, it said that, at 26 points, the BCI remained deep in net negative terrain, with most respondents still expressing a sense of pessimism.

“Indeed, at current levels, business confidence remains consistent with an economy bumbling along in near recession-like conditions.”

RMB chief economist Ettienne le Roux said: “For us to convincingly conclude that the long and persistent downturn in the RMB/BER BCI has bottomed out will take not one, but several, quarters of improvement in sentiment driven by a consistent recovery in underlying activity.”

He said further signs that the worst of the slowdown in global trade was behind us, coupled with a confidence-inspiring national Budget and the successful implementation of the government’s “economic transformation, inclusive growth and competitiveness strategy” would “certainly go a long way to help make this happen”.

Annabel Bishop, the chief economist at Investec, said on Wednesday that while the rebound was cheering, it was only one quarter’s figure, and a few more quarters of rising sentiment readings would make it certain that the trend in sentiment had indeed turned.

She said the synchronised global economic slowdown had weakened both economic growth and business confidence in South Africa via the export channels.

“However, the growing likelihood of a ‘first phase’ trade deal between Russia and the US likely buoyed business confidence somewhat in November,” Bishop said.

She said South Africa’s economic outlook remained heavily exposed to the global economic outlook.

Lullu Krugel, PricewaterhouseCooper’s (PwC’s) strategy and chief economist for Africa, and Christie Viljoen, PwC’s strategy and economist, said although business confidence was less negative, business was pessimistic.

“The business community’s general pessimism is far from misplaced: IHS Markit recently reported that new business received by private sector firms has now declined for 16 straight months. Both S&P Global Ratings and Moody’s Investor’s Service have in recent weeks revised their outlooks on South Africa’s sovereign to ‘negative’, reflecting weak fiscal dynamics partly as a result of the slow economy and weak growth prospects,” they said.