Gordhan exit hits business confidence
• Instability hits index after three months of advances
The axing of Pravin Gordhan as finance minister has tempered business confidence after a three-month improvement and economists expect it to continue to decline.
“Its not surprising considering the circumstances,” Business Unity SA CEO Tanya Cohen said on Wednesday.
“In general terms, we are certainly very concerned from an economic perspective. We already have low growth. The current political instability and uncertainty won’t help.
“Low growth in itself is a reflection of low business confidence. It may well have a negative impact on growth and employment because it becomes harder to make commitments in this climate.”
Cohen was commenting soon after the release of the South African Chamber of Commerce and Industry (Sacci) business confidence index (BCI), which fell 1.7 index points to 93.8 in March from 95.5 in February.
This is the first month since November 2016 that the BCI has declined year on year.
Sacci said on Wednesday that the reshuffle at the end of March upset the momentum of improving business confidence. But the March index had not fully captured the impact.
“The latest events dented the renewed positive motion of the BCI after the uncertain business climate in 2016.”
Sacci said the downgrade by S&P Global Ratings, which had mainly had an effect on the exchange rate and capital markets, knocked another 0.6 points off the confidence index.
“If the rand continues on these exchange rate levels, the Sacci BCI could therefore shed another 0.6 index points in April 2017,” it said.
First National Bank senior economist Jason Muscat said: “Lower business confidence means a further contraction in growth of fixed capital formation from the private sector, which means lower growth.
“We’ve had reports that some investors have halted plans they had to invest and that is likely to be the theme until we have greater certainty.”
Muscat expected April’s confidence to take a more serious knock. “It’s not possible to raise business confidence in an environment with uncertainty. Investors are looking for stability and assurance,” said Muscat.
Barclays Africa economist Miyelani Maluleke said private sector business confidence remained “quite weak” as reflected in the Bureau for Economic Research’s quarterly surveys. “It certainly doesn’t bode well for private sector investment, which has already contracted 6% in 2016 alone,” Maluleke said. “What’s critical for SA right now is policy certainty and commitment to policies that will support investment.
“Ultimately, this is what we’ll need to lift growth and create those desperately needed jobs, ” he said.
However, Black Business Council president Danisa Baloyi was confident that the cabinet reshuffle had no bearing on business confidence.
“Countries shuffle all the time. The people chosen aren’t weak. They haven’t had a chance to perform.
“I’m worried as to why we’re downgraded when the minister has just been appointed.
“Cabinet reshuffles are routine in every country.
“I’m concerned that people think this should create negative business confidence.”
She added: “As long as we’re pulling in different directions — that pulls down confidence.”
THIS IS THE FIRST MONTH SINCE NOVEMBER 2016 THAT THE BCI HAS DECLINED YEAR ON YEAR.