South Africa’s business confidence sinks to 21-year low: Survey

South Africa’s business confidence sank to a 21-year low in the first-quarter, a survey showed on Wednesday, as recovery in the building, manufacturing and retail sectors in the last quarter reversed in the country grappling with its second recession in two years.

The Rand Merchant Bank (RMB) business confidence index (BCI), compiled by the Bureau for Economic Research, was at 18 points for the first quarter, down from 26 points for the fourth quarter.

Regular power cuts in December, news around the bailout of state-owned enterprises like South African Airways, a deterioration in the government’s finances as spelled out in the national budget and the coronavirus outbreak also led to the drop in confidence.

“Since the survey was completed in early March, things have gone from bad to worse, particularly on the global front…for a small open economy already in recession, the timing of the prospective sharp COVID-19-induced global slowdown could not have been worse,” RMB said.

It said that the index is likely to continue to trend lower in the period ahead, with negative consequences for future trends in private sector fixed investment.

South Africa entered its second recession in two years in the final quarter of last year as agriculture, transport and construction contracted, data showed last week, highlighting the impact of power cuts on the economy.

Regular power cuts as state power utility Eskom fails to meet electricity demand have led to a steady decline in South African business and consumer confidence.

South African retailers have struggled to increase earnings as cash-strapped shoppers shy away from spending on higher-margin discretionary goods such as electronics, hurting the likes of Walmart-controlled Massmart.

“Against this backdrop, the government’s seeming inability to fast track much needed growth-enhancing reforms is frustrating, to say the least,” said RMB’s chief economist Ettienne le Roux.

Source: SABC News (sabcnews.com)