Sentiment within the private sector businesses in Durban is likely to remain severely depressed by the recent torching of trucks after confidence plunged for the second quarter in a row.
This comes as the Durban Business Confidence Index declined to 37.28 index points in the second quarter of 2023, down from 43.27 points in the previous quarter.
This was a second consecutive decline of the index following another dip in business confidence in KwaZulu-Natal’s only metro, from 44.04 points in the fourth quarter of 2022.
The Index is compiled by the Macroeconomics Research Unit in the University of KwaZulu-Natal (UKZN) School of Accounting, Economics and Finance.
It is a collaborative project with the Durban Chamber of Commerce and Industry and eThekwini Municipality.
UKZN said the downward trend of the Durban business confidence index mirrored the overall national business confidence, which had been declining for five consecutive quarters.
Dr Ntokozo Nzimande, a research associate in the Macroeconomics Research Unit at UKZN, said the decline in the index could be attributed to the challenging economic and financial conditions prevailing in both domestic and global economies.
Nzimande said confidence was depressed by the ongoing electricity rationing, public policy uncertainties, the breakdown in diplomatic relations between the US and South Africa, and weak economic performance, including lacklustre growth, cost pressures, and continuous interest rate increases.
He said the reports of torching of heavy duty trucks in KZN and other provinces were highly likely to have adverse effects on business confidence, not only in Durban but also in the province and the whole country.
“It is estimated that trucks in South Africa transport nearly two-thirds of total freight weight and approximately three-quarters of total freight value,” Nzimande said.
“Given the below-normal and declining business confidence in Durban and South Africa, the news of heavy duty trucks being torched will further worsen the business confidence levels, which may have negative effects on investment, employment and growth.”
Nzimande also noted that KZN was yet to fully recover from the devastating floods that hit Durban in April 2022.
He said this was the most devastating disaster that has ever hit the province in terms of loss of life, infrastructure damage and economic impact.
In addition, he said the continued electricity shortage and ‘tornado’ that hit parts of Inanda last month, damaging water pipelines, power lines and property, had caused a major setback in the recovery process.
“eThekwini Municipality has set up an emergency joint operations team to co-ordinate the response to the damage caused by the ‘tornado’ as well as heavy downpour in the areas within the neighbourhood of Inanda,” Nzimande said.
“This is likely to burden the local budget further. One of the sectors that is likely to be hardest hit is tourism as visitors to Durban worry for their safety.”
The business confidence index of 37.28 in the second quarter, however, concealed significant variations across different sectors.
For instance, business confidence in the financial sector has been steadily declining, dropping from 37.73 points in the first quarter of 2023 to 35.22 points in the second quarter as a result of the challenging economic and financial conditions.
Community, social and personal services sector has witnessed consecutive quarterly declines in business confidence, from 46.51 in the first quarter to 39.96 in the second quarter.
The transport, storage and communication sector also experienced a decline in business confidence, dropping from 66.88 points to 44.51 points primarily due to escalating fuel costs, uncertainties stemming from the looting incidents and the natural disasters.
However, the manufacturing sector has shown improvement, with business confidence in this sector rising from 30.8 points to 34.75 points, which was likely attributable to the recent enhancements in the country’s electricity supply.
Meanwhile, a large proportion (55.8%) of the surveyed business executives in the municipality were anticipating that the SA Reserve Bank would increase the interest rate in the third quarter of 2023.
The respondents identified the cost of labour as the most limiting factor (36.5%) to business performance in Durban.
They also said the high rate of inflation continued to cause disorder in the Durban economy through an increase in the cost of living and investment, with cost pressures weighing on the profitability of businesses.