Sharp drop in business confidence

File Image: President Ramaphosa

File Image: President Ramaphosa

Published Jun 14, 2018


JOHANNESBURG - South Africa’s troubled economy received a further blow yesterday when it was reported that business confidence had fallen sharply in the second quarter.

The RMB/BER business confidence index fell 6 points to 39 from 45 in the first quarter, when it jumped 11 points on the back of Cyril Ramaphosa’s ascension to the presidency in February. 

RMB/BER said business sentiment deteriorated in four of the five sectors that make up the index. 

Building contractor confidence fell to 37 points from 41 in the first quarter, while the retail sector eased from 42 to 33 points. 

Manufacturing dropped from 37 to 27 points, while new vehicle dealer confidence dropped from 52 points to 35 in the second quarter. 

Ettienne le Roux, the chief economist at RMB, said the excitement following the change in political leadership had fizzled out. 

“Ramaphoria also faded in the wake of the ever-rising petrol price and the political debate around expropriation of land without compensation intensifying, and growing signs that the strong, synchronised global economic upswing has started to fizzle out,” he said. 

Wholesales was the only sector to register an uptick, surging from 53 to 62 points in the second quarter. 

Adrian Saville, the chief executive Cannon Asset Managers, said the weakening of business sentiment captured the economic anxiety that had rolled into 2018 from 2017. 

“In addition, the VAT rate increase, higher fuel prices, rand weakness, and the announced but unclear intentions regarding land ownership have impacted confidence levels,” Saville said. 

International ratings agency Fitch also took a dim view of South Africa’s economy this year, revising its outlook from the 2.3 percent it forecast previously to 1.7 percent. 

Fitch, which said South Africa’s first-quarter numbers necessitated a downward revision of the 2018 forecast, joined Nedbank and NKC African Economics, which have cut their full-year forecasts from 1.9 percent to 1.5 percent following the first-quarter GDP data. 

The economy contracted the most since 2009 in the first quarter, dropping 2.2 percent. 

The key sectors of agriculture, manufacturing, mining and retail registered negative growth in the first quarter. 

April’s activity data for manufacturing production and retail sales showed that weakness from the first quarter carried over to the second quarter. 

Maarten Ackerman, the chief economist at Citadel, said it was clear that many people have started to adjust their growth assumptions downwards following the poor GDP in the first quarter.

 “I think we’ll probably still see between 1.5 and 2 percent growth, although 2 percent is a bit of a stretch, which might only be possible when the policies begin to work, which I think is only going to be in about 2019 and onwards,” said Ackerman.


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