Business confidence hits lowest since 1980s

RMB and BER surveys show that more and more business people are simply giving up hope

In a sign of the challenges facing President Cyril Ramaphosa as he seeks to boost the economy and attract investment, business is more gloomy than it has been since the turbulent 1980s when PW Botha’s infamous Rubicon speech entrenched SA’s pariah status.

Just four months after an election that was meant to reinforce his reformist credentials, Ramaphosa has faced increasingly loud calls from business leaders to enact changes needed to improve the investment climate. Two business confidence indicators on Wednesday painted a grim picture, suggesting the post-election optimism is all but gone.

The SA Chamber of Commerce and Industry (Sacci) index dropped in August to levels not seen since the UN Security Council called on members to introduce more stringent sanctions against SA 34 years ago in the wake of Botha’s speech. A confidence index by Rand Merchant Bank (RMB) and Stellenbosch University’s

Bureau for Economic Research (BER) fell to a two-decade low.

It appeared that “more and more business people participating in the BER’s survey are simply giving up hope a concerning development, and one that spells even greater trouble ahead for an already weak economy”, RMB and BER said in a statement with their report.

While Ramaphosa’s initial rise to the presidency, with a promise of reforms that would deliver a 3% growth rate in that year, boosted confidence after a decade of stagnation and corruption under his predecessor, Jacob Zuma, business has been left frustrated by a lack of delivery. SA’s fiscal situation worsened as political infighting within the ANC and its alliance partners slowed reform on everything from fixing Eskom to cutting the government’s wage bill, which eats most of the budget.

The latest numbers were compiled before the latest spate of violent attacks against foreigners and national anger at the rape and murder of UCT student Uyinene Mrwetyana, highlighting the government’s failure to deal with violent crime, which will probably dent confidence further.

The head of the country’s largest property firm said it was unlikely to increase its dividend during the current financial, which would be the first time in a decade, as a result of SA’s dire economic situation, which showed no sign of improvement. “It’s really difficult to say that there are signs of green shoots in the economy,” Norbert Sasse, Growthpoint CEO, said.

“Right now there are no catalysts to get things back on track.”

Addressing MPs in Cape Town, SA Reserve Bank governor Lesetja Kganyago said low business confidence was hitting investment and reducing the country’s growth prospects.

“Restoring confidence is the cheapest form of stimulus,” said the governor, who has often come under attack for not being more aggressive in loosening monetary policy in an attempt to boost the economy.

The Bank, which cut the repo rate in July, is set to decide on interest rates next week.

While a lack of confidence in the economy has also been reflected in foreigners being net sellers of SA equities and bonds

to the tune of a combined R66.6bn in 2019 so far the rand has been resilient in recent weeks, climbing to a one-month high against the dollar on Wednesday.

The prospect of monetary easing in developed markets, which would maintain the yield attraction of holding SA bonds, has supported the currency despite the gloomy local news. It was 0.8% weaker at R14.7566/$ on Wednesday, having gained about 1.6% in the previous three trading days, reaching its strongest level since August 2.

A stronger rand, which limits increases in the price of imported goods and helps keep inflation safely within the Bank’s 3% to 6% target, may give Kganyago and the rest of the monetary policy committee room to give the economy much needed stimulus with another reduction in rates.

BNP Paribas economist Jeff Schultz said the government should use the medium-term budget speech, to be delivered by finance minister Tito Mboweni in October, as an opportunity to “present some more feasible action plans on how it is going to get the economy going”.

3% the growth promised by President Cyril Ramaphosa when he took over the presidency