Business confidence in South Africa fell to a four-month low in March as the economy battled to gather upward momentum on prevailing uncertainty over intermittent lockdowns. Picture: Oupa Mokoena/African News Agency (ANA)
Business confidence in South Africa fell to a four-month low in March as the economy battled to gather upward momentum on prevailing uncertainty over intermittent lockdowns. Picture: Oupa Mokoena/African News Agency (ANA)

Business confidence sags in March on continued Covid-19 uncertainty

By Siphelele Dludla Time of article published Apr 8, 2021

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JOHANNESBURG - BUSINESS confidence in South Africa fell to a four-month low in March as the economy battled to gather upward momentum on prevailing uncertainty over intermittent lockdowns.

The SA Chamber of Commerce and Industry (Sacci) said yesterday that the business confidence index (BCI) dropped to 94 points in March from 94.3 points in February. This was the lowest reading in the BCI since last November 2020 and after reaching a two-year high in January 2021.

Sacci said the business climate had remained constricted due to continuing economic uncertainty. It said the prospects of a further lockdown in the offing with rumours of a third wave of infections becoming prevalent was also contributing to the negative climate.

Sacci chief executive Alan Mukoki said the government needed to start attracting investment back to the economy as activity picks up in the coming months.

Mukoki said the vaccination process should play an important positive role in reigniting the economy.

“It remains important to attend to economic matters that range from policy certainty, structural impediments and low investment ratings that are still preventing the economy from breaking through the present impasse,” Mukoki said.

“The start of the vaccination process, albeit tentative should, however, make a meaningful impact on reducing the risk of further random applications of lockdown restrictions and the uncertainty it causes for the economy and business.”

Despite the BCI slightly easing last month, it was 4.1 index points better than the 89.9 points recorded in March 2020 before the lockdown process.

Sacci said the private sector has shown resilience and tenacity with a substantial number of businesses managing to survive in light of the impact of the lockdown.

Since October 2020 onwards the business climate kept on improving albeit with marginal monthly advances as restrictions were being lifted, causing less disruption to the economy. For the six months ending March 2021, the BCI average improved by 13.2 index points on the preceding six months.

Sacci said the positive month-on-month contributions to the BCI in March 2021 were due to increased number of new vehicle sales and higher volume of merchandise imports followed by lower levels of inflation.

It said these improvements were mainly brought about by the stronger rand exchange rate, lower inflation, higher equity prices on the JSE, and global commodity prices. Sacci said the impact of vaccinations could create space for the promotion of longerterm investor confidence which is an imperative for economic growth and business confidence.

Meanwhile, Reuters reports that South Africa’s private sector activity expanded marginally in March, as growth in business output slowed while new orders fell again, a survey showed yesterday.

IHS Markit’s Purchasing Managers’ Index (PMI) rose slightly to 50.3 points from 50.2 points in February, remaining above the 50-point level that indicates expansion for the sixth months in a row.

“Business output continued to expand at the end of the first quarter of 2021 … However, with many respondents seeing a drop in client demand, the rate of expansion slowed and was only slight,” IHS Markit said in a statement.

“Additional supply concerns may constrain activity further in the coming months, before the global Covid19 vaccine roll-out can restore business confidence and global demand later in the year,” IHS Markit economist David Owen said.

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