JOHANNESBURG - Business confidence fell to its lowest level since the second quarter of 2017 as policy uncertainty continued to weigh heavily on growth and sentiment among building contractors and new vehicle dealers deteriorated.
The Rand Merchant Bank and the University of Stellenbosch’s Bureau of Economic Research (RMB/BER) Business Confidence Index (BCI) shed 3 points to 31 points in the fourth quarter from 34 points in the previous quarter. RMB/BER said yesterday that the index fell to its lowest since President Cyril Ramaphosa assumed office in February. It said seven out of 10 surveyed business executives said they remained unhappy with the current business conditions. The index remained below the 50-point neutral mark in all the sectors for the sixth consecutive quarter.
RMB chief economist Ettienne Le Roux said policy uncertainty weighed on the sentiment. “While President Ramaphosa’s refreshing new focus on public-private-sector partnerships is welcome, the reality is that a multitude of political and policy issues, chief among which is the uncertainty around the government’s land reform plans, continue to weigh down on confidence,” said Le Roux.
“Time is running out as global headwinds are mounting and domestically inflation as well as policy interest rates have bottomed,” said Le Roux. The survey was conducted in the first two weeks of November, before the SA Reserve Bank’s 25-basis point interest rate hike last week, the Cabinet reshuffle and “Black Friday” promotion sales.
RMB/BER said none of the five sectors measured scored above the neutral 50-level. It said confidence among new vehicle dealers plunged 22 points during the period to 15 – the lowest of the sectors following an unexpected deterioration in sales volumes.
Building contractor confidence fell back to 32 points from 44 points in the third quarter as previous expectations of improved activity in especially the residential sector failed to materialise. “The fourth quarter’s reading of lower confidence is consistent with continued weakness in both residential and non-residential building activity,” Le Roux said.
Retail trade recorded the biggest improvement in sentiment to 33 points in the fourth quarter, rebounding from 23 points in the third quarter. Manufacturing confidence jumped slightly to 30 points from 26 points in the third quarter. Gerrit van Rooyen, an analyst at NKC Research, said the index marked a new low for 2018 and the Ramaphosa presidency.
“Improved gross domestic product and employment growth, lower fuel prices, reduced international geopolitical tensions as well as more extensive domestic economic and political reforms are what is needed to lift business confidence out of the current mire,” he said. Investec chief economist Annabel Bishop said the index marked a continued pull-back from the first quarter reading of 44 points when Cyril Ramaphosa became president. “The fourth quarter retreat in the BCI occurred as the economic outlook dulled, growth forecasts for 2018 have been revised down towards 0.5 percent year-on-year, from closer to 1.5 percent year-on-year.
“This has little yet achieved in turning around South African government and key state-owned enterprises finances, competitiveness and economic performance,” Bishop said.