Busi­ness con­fi­dence hits low­est since 1980s

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

Business Day - - FRONT PAGE - Odwa Mjo and Su­nita Menon

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

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