SA business tip-toes back into confidence

BUSINESS confidence rebounded marginally in the third quarter, but still remained subdued with 70 percent of executives unsatisfied with business conditions in South Africa.

Data released yesterday by Rand Merchant Bank (RMB)/Bureau for Economic Research showed that the Business Confidence Index (BCI) reversed some losses it recorded in the second quarter, inching up 6 index points to 35 points.

RMB chief economist Ettienne le Roux said while the increase was encouraging, the improvement had to be seen in the broader context of continued weak domestic demand, subdued business activity, low profitability and heightened political uncertainty.

“Although confidence did increase in four of the five sectors making up the BCI, not a single sector has a reading above the neutral 50 mark. Pessimism thus remained relatively widespread in the third quarter,” Le Roux said.

The index is measured in the five sectoral indices of manufacturers, building contractors, retailers, wholesalers and new vehicle dealers.

It fell to 29 points in the second quarter – its lowest level since the 2009 financial crisis – from 40 in the first quarter.

The sentiment improved, however, in the third quarter, with manufacturers rebounding from 16 points to 27, while new vehicle dealers’ confidence rose from 11 to 19 points in the quarter under review.

The retail sector inched up from 35 to 38 points and the building industry shot up from 36 to 44 points. Only wholesale registered decreased confidence, declining marginally from 49 to 48 points, but still a few points away from the 56 points it recorded in the first quarter.

Kamilla Kaplan, an economist at Investec said: “Business confidence remains depressed, with the gauge entrenched at levels below 50. This contrasts with the international backdrop, whereby global private sector confidence has been strengthening, as global growth and trade have rebounded from post-crisis lows reached in 2016.”

“Depressed business confidence continues to manifest in declining investment, of 2.5 percent year-onyear in the first half of the year after a 6.8 percent year-on-year contraction in 2016. In addition, sustained and meaningful private sector job creation is absent,” Kaplan said.

Increased

Meanwhile, the South African Chamber of Commerce and Industry (Sacci) yesterday said that its Trade Activity Index for August increased to 48 from the 47 points recorded in July 2017.

The chamber said employment sub-index, however, remained passive at 43 last month – 11 index points lower than in August of last year.

Alan Mukoki, the chief executive of Sacci, said the moderate trade conditions emulated the decline in value added by the wholesale and retail trade, hotels and restaurants as well as lower import and export volumes.

“The stronger rand and lower nominal interest rates helped to augment moderate trade conditions. It is expected that interest rates could further be lowered and thus decrease the real cost of finance. It, however, depends whether the balance of payments situation is conducive to such a move,” Mukoki said.