JOHANNESBURG - May's national elections failed to lift business confidence with a gauge measuring business sentiment remaining flat in the second quarter, largely on depressed confidence in manufacturing and new vehicle traders.
The Rand Merchant Bank (RMB)/Bureau for Economic Research (BER) Business Confidence Index (BCI) remained unchanged in the second quarter at 28 points, with over seven out of 10 respondents dissatisfied with the current business conditions.
Ettienne le Roux, the chief economist at RMB, said the last time sentiment was this gloomy was two years ago and before that during the global financial crisis-induced 2009 recession.
“The latest RMB/BER survey results have dampened hopes of a strong bounce-back following the first quarter’s contraction in gross domestic product,” Le Roux said.
“Besides stubbornly low confidence and business activity deteriorating in all five sectors, output of the large business services sector also weakened noticeably - something that could well counter much of the likely impact from a short-term resurgence in agriculture and mining output.”
He said the risk of another technical recession in the first half of the year remained real.
The results of the survey showed that sentiment in the building sector had improved by seven index points to a still subdued 30 points on scarcity of new work.
Confidence in the retail sector rose by a pedestrian four points to 28 points, reflected in modest sales volumes in the sector, while sentiment in the wholesale industry increased by two points to 42 points, markedly lower than the 56 points of a year ago.
However, confidence in the manufacturing sector declined three points to 22 points, while sentiment in the motor trade industry plunged from 26 points to 17 points.
Investec’s chief economist, Annabel Bishop, said confidence remained depressed and business conditions for manufacturers were deemed highly unsatisfactory.
“The de-industrialisation trend continues in South Africa, with unemployment rising alongside it, as industry is also seen to continue to face regulatory blockages and a high regulatory burden, with anecdotal evidence even of some inconsistent, and arbitrary application of these regulations,” Bishop said.
“Many businesses continue to battle to pass on high-operating costs to financially vulnerable consumers. This has negatively impacted the desire to expand operations and lift fixed investment to expand capacity for production, among other factors.”