KZN constrained by concerns
Researchers find that 70% of businesses lack confidence in future
IT IS the so-called “animal spirits” that drive economic activity, which is why economic research institutes survey respondents to find out how confident consumers and businesses are about the future. This is then captured in consumer and business confidence indices.
The Bureau for Economic Research (BER) this week released the outcomes for the latest survey and they make for sobering reading as the optimism of the start of the year has faded as the reality of loadshedding has reminded respondents that although there has been a change in political leadership, many structural constraints remain.
This easing in confidence is likely to constrain the Kwazulu-natal (KZN) economy going forward as you need to have confidence in the future before you invest in new capacity and create new jobs.
The structural constraints are illustrated by the periodic loadshedding instituted by Eskom in June, August and November, while the land transport data released by Statistics South Africa reflected yearon-year (y/y) declines in five out of nine months so far this year for rail payloads.
In September, rail payload eked out a 0.2 percent y/y increase after a 4.8 percent y/y decline in August, a 9.0 percent y/y slump in July and a 5.7 percent y/y drop in June. The woes at Transnet are not confined to rail as the major R7 billion capital expenditure project at Durban container terminal has been put on hold due to worries there may have irregularities with the tender award.
Consumer confidence levels deteriorated substantially during the third quarter of 2018, with the BER Consumer Confidence Index (CCI) falling to +7 in the third quarter from +22 in the second quarter. Despite the sharp drop, the majority of households still expect their household finances and the performance of the economy to improve over the next 12 months, so this should give a measure of comfort to KZN businesses.
The third quarter also remains far higher than the very low readings recorded during the last three years of President Jacob Zuma’s term when they ranged between -3 and -15 as there was more policy uncertainty. The third quarter reading is also significantly above the long-run average reading of the CCI of +2 since 1994, suggesting that consumers are still optimistic that the outlook for the South African economy and their own household finances will improve during the next 12 months.
Businesses were far more sceptical about the ability of President Cyril Ramaphosa to right the wrongs of the Zuma years, so there was no surge to a record high in the first quarter 2018 as took place in consumer confidence.
In the fourth quarter the BER Business Confidence Index eased to 31 from 34 in the third quarter, which means that almost 70% of businesses are not confident about the future.