Business confidence takes a knock in third quarter
July riots, tougher lockdown and cyberattack on Transnet push RMB/BER index back into negative territory
SA’s recovery in business confidence was thrown off course in the third quarter in the wake of rioting, harder lockdown restrictions and transport disruptions due to a cyberattack on SA’s port systems.
The latest Rand Merchant Bank (RMB)/Bureau for Economic Research (BER) business confidence index (BCI) shows that confidence slid to 43 points in the third quarter, back into negative territory, after clawing its way back to neutral terrain in the previous three months.
The survey measures sentiment from 1,300 businesspeople in the building, manufacturing, retail, wholesale, and motor trade sectors. The index’s neutral mark is 50, with a reading below that deemed negative.
Business confidence is an important ingredient for much needed fixed investment, which helps spur job creation and economic growth.
The decline followed several “confidence-sapping” events, RMB chief economist Ettienne Le Roux said in a statement — notably the third wave of Covid-19 infections and harder lockdown restrictions, as well as the unrest that gripped KwaZulu-Natal and parts of Gauteng in July.
Businesses also had to deal with transport disruptions, initially arising from the unrest, and then because of the cyberattack on logistics parastatal Transnet and the resulting damage to the Durban port’s systems.
Supply chain interruptions, as well as higher-than-usual worker absenteeism due to Covid-19 infections and taxi violence in the Cape Metro, also weighed on businesses.
There were however “countervailing factors” that limited the damage to confidence levels, Le Roux said, including the relief package that the government announced in the wake of the third wave and the unrest.
Other positives included the wage settlement between National Treasury and civil servants, the ongoing mineral export boom, and — in an important move on the policy front — the department of mineral resources & energy’s decision to lift the licence limit for embedded generation to 100MW from 1MW.
“Without these, the third quarter drop in confidence could easily have been even worse,” said Le Roux.
Sentiment deteriorated across all the sectors comprising the BCI, except for retail trade, the survey shows. Though confidence in the manufacturing sector declined from 46 to 41, this was still the highest level since 2016.
“Thanks to this resilience, the adverse developments in the third quarter are likely to deliver only a temporary setback to what otherwise remains a cyclical economic recovery”, said Le Roux.
To cement and invigorate the business cycle upswing, the government must not only build on the reform momentum, but also deliver on the various growth-boosting initiatives outlined in President Cyril Ramaphosa’s Economic Reconstruction and Recovery Plan, added Le Roux.