South African business confidence declines

The Bureau for Economic Research (BER) and RMB have released the RMB Business Confidence Index (RMB/BER BCI) for the first quarter of 2023, which showed South Africa’s business confidence declined by 2 index points.

The index declined from 38 in the fourth quarter of 2022 to 36 in the first quarter of 2023.

The BER said that this outcome could have been worse considering the recent severity and frequency of power outages in the country and the associated drop-off in business activity.

However, “the business mood certainly remains gloomy”.

The first quarter survey was conducted between 8 and 27 February and covered 1,050 senior executives in the building, manufacturing, retail, wholesale, and motor trade sectors.

Confidence in manufacturing and consumer-facing retail nosedived, while little changed in the building sector. A bit of improvement was seen in the wholesale and new vehicle trade.

Manufacturing confidence

Manufacturing confidence plummeted to 17 in the first quarter – a 9-point decrease.

A level this low is rare and speaks to a sector deeply impacted by intense load-shedding and dilapidated logistic infrastructure.

The deterioration in sentiment occurred across sub-sectors, all of which shared a common feature: Falling domestic sales and production.

Fixed investment to expand existing production capacity also decreased. This is due to weakened demand and increased expenditure on alternative energy generation measures fueled by load-shedding.

Retail confidence

Retail confidence also fell sharply from 42 to 34.

This fall can also be attributed to load-shedding, which reduced trading hours and increased operating costs due to diesel generators having to run more often.

Another reason is the high consumer price inflation and slow compensation growth that continue to pressure household disposable income.

Sales volumes worsened across durable goods retailers (such as furniture and electronics) and non-durable goods retailers (food, beverages etc.).

However, retailers of semi-durables (mainly clothing) saw a slight improvement in sales during the first quarter.

Building confidence

The confidence of building contractors marginally declined from 46 to 43.

Although still in net negative terrain, this is a marked improvement from the low levels recorded during 2020 and 2021.

Load-shedding did not just have a negative impact, as sub-contractors – particularly electricians – confidence and activity in the overall building sector rose significantly. This is largely due to the installation of backup power.

Wholesaler confidence

Wholesaler confidence rose slightly from 37 to 40.

New vehicle dealer confidence

New vehicle dealer confidence also rose slightly from 41 to 44.

All outcomes below 50 mean most respondents in these sectors are unhappy with prevailing business conditions.