JOHANNESBURG - Business confidence in South Africa fell to a seven-month low in March as the coronavirus pandemic created uncertainty about the global and domestic economy.
The SA Chamber of Commerce and Industry (Sacci) said yesterday its Business Confidence Index (BCI) eased 2.8index points to 89.9points following a 0.5points uptick in February.
Sacci said the decline was the sharpest month-on-month fall since last August. The March BCI was 1.9index points lower than in the corresponding period last year. Sacci said the impact of the Covid-19 came on top of the country’s tight business climate, with the economy already in a technical recession. “The exogenous Covid-19 health shock and the economic impact thereof came on top of a tight business climate and a subdued South African economy,” Sacci said.
“The economic effect of the Covid-19 on trading partners and lately on the South African economy became more evident and pronounced towards the end of March 2020.”
The economy slumped into a recession last month and the SA Reserve Bank (SARB) forecast that it could contract as much as 4 percent this year, following two consecutive credit ratings downgrades by Moody’s and Fitch. SARB this week said that the 21-day nationwide lockdown aimed at slowing the spread of the pandemic had weighed on output and Covid-19 is likely to result in 370000 job losses and 1600 business closures.
Sacci said seven of the 13 sub-indices declined in March, four contributed towards a positive business climate, while two remained unchanged.
It said exceptional negative monthly impacts came from the number of new vehicle sales, exchange rate and lower share prices - all mainly due to global uncertainty and unpredictability caused by Covid-19. Sacci said the slump did not yet fully reveal the extent of Covid-19 on the economy and the business climate, indicating that April’s figures may be even worse.
“The 2.8 index point drop in the BCI from March 2019 to March 2020 does not yet fully reveal the extent of Covid-19 on the economy and the business climate,” it said.
“The March BCI mainly contains the effect of the subdued performance of the domestic economy and to some measure the effect on international trade owing to the impact of the virus on trading partners.”
Sacci said extraordinary steps and sacrifices by the government, business and households would be necessary over the short term.
“All efforts should be put in place not to create fear and panic and to put sound economic policy in place to ensure sustainable economic performance post Covid-19,” it said.
“Much could be learned from other countries on mistakes and efforts made to cope with the short-term effects of Covid-19, but South Africa must not neglect efforts to re-establish business and investor confidence after the present distractions of Covid-19 have subsided.”