Business confidence in SA is still on a downward trend

BUSINESS confidence in South Africa fell one notch to 34 points in the fourth quarter, with retail sentiment taking a hammering. Data released by RMB/BER yesterday showed that retail confidence dropped by 9 points to 29 – a level last seen 18 months ago.

RMB chief economist Ettienne le Roux said it remained unclear whether Black Friday and the approaching festive shopping season lifted retailers’ profitability in the quarter.

“Clothing retailers had it particularly bad in the fourth quarter, while food retailers continued to struggle as well, due to weak profitability.

“By contrast, a recovery in sales volumes, coupled with a slight increase in pricing power, saw sentiment among retailers of durable consumer goods improve,” Le Roux said.

The index poll was finalised before S&P Global Ratings downgraded South Africa’s local-currency credit rating to speculative grade on Friday.

The manufacturing confidence slipped to 24 points as domestic sales remained under pressure, while building sentiment eased from 44 points to 34 points, fully reversing its third-quarter gain.

The decline in the construction sector was more pronounced in the non-residential sector, which saw sentiment dropping to a shockingly low 11 points. Concerned The South African Reserve Bank last week said it was concerned that the construction sector remained weak. By contrast, the poll found that wholesale confidence increased from 48 to 51 points, as the consumer goods sector offset a poor showing from the non-consumer goods.

Motor trade confidence increased by 13 points in the period under review from a low 19 points in the third quarter.

Macroeconomics statistics website Trading Economics said business confidence in South Africa averaged 44.64 points from 1975 until 2017, reaching an all-time high of 91 points in the third quarter of 1980 and a record low of 10.20 points in the third quarter of 1985.

Le Roux said the emergence of a strong new political leadership with the determination to implement market-friendly policies and root out corruption would boost confidence.

“The government has a narrow window of opportunity to put in place an action plan to change the country’s longer-term growth prospects for good,” Le Roux said. “We need bold and unpopular solutions for the jam South Africa is in.”