Confidence in the service sector plummeted to a 15-year low in the second quarter as the industry battled to come to terms with the country’s hard lockdown regulations implemented in March.
The Bureau for Economic Research (BER) yesterday said the implementation of hard lockdowns to curb the spread of Covid-19 came as a blow for the sector. The survey showed that the sentiment plummeted from an already-low level of 17points in the first quarter to a meagre 7points in the second quarter.
The lockdown meant that most businesses were prohibited from operating, or could operate only on a limited scale, barring those producing and selling essential goods.
The BER said the survey showed that activity in restaurants, hotels and real estate came to a complete standstill, while transport and business services registered historically unprecedented falls in the three months to June.
“Given the unprecedented lockdown to contain the spread of the Covid-19 virus and the resultant almost complete shutdown of economic activity, it is not surprising that the confidence of other service providers dropped to the lowest level in the survey’s 15-year history,” the BER said.
“The confidence of hotels and restaurants, as well as real estate agents, dropped to zero, which means that none of the participants regarded business conditions as satisfactory.
“Transport and business services confidence came in at 13 and 15points respectively, which means that close to nine out of 10 participants rated business conditions as unsatisfactory.”
The survey took place during lockdown level 4 and was conducted online between May 13 and June 1, with nearly 500 executives.
The Business Confidence Index (BCI) plunged to a historic low in the second quarter of 2020 as the majority of businesses were dissatisfied with conditions due to the lockdown.
The BER said the results of the other services survey provided further evidence that South Africa would suffer a historic gross domestic product (GDP) decline in the second quarter.
The economy entered a deep recession this year as GDP fell 2percent in the first quarter after contracting by 1.4percent in the fourth quarter of 2019.
The government said GDP was expected to fall at least 7percent this year, but economists forecast a more severe contraction year-on-year.
Investec chief economist Annabel Bishop said Eskom’s incessant load shedding had become one of the biggest risks to an economic recovery.
“We continue to expect a contraction of -48.2percent quarter on quarter in the second quarter of 2020 in GDP, which is a fall of -15.2percent quarter on quarter,” Bishop said.
“For GDP for 2020, we forecast a contraction of 10.1percent year-on-year, with marked load shedding of electricity a risk to recovery.”