Business confidence suffers rare across-the-board decline
Business confidence is at its lowest level since the 2009 recession.
According to the RMB/BER business confidence index (BCI), confidence plummeted 11 points to 29 in the second quarter of 2017. Business confidence has stayed between 32 and 42 index points in the past year
A score below 50 indicates damped confidence.
Seven out of every 10 respondents said they were downbeat about prevailing business conditions. All five sectors covered in the survey (manufacturing, retail trade, wholesale trade, motor trade and the building sector) have a reading below 50.
In a statement released on Wednesday, RMB said: "The sharp deterioration in sentiment reflects more than just the impact of increased political uncertainty. While the Cabinet reshuffle and consequent sovereign credit rating downgrades undoubtedly played a role, confidence was also knocked hard by persistently weak business activity."
It said a decline of confidence across all five sectors "is not a regular occurrence".
"In fact, over the past 42 years it occurred only in 12 instances, the last of which was during the global financial crisis when it correctly signalled the onset of a cyclical domestic economic downturn.
"The fear is that the broad-based drop in confidence this time around is a precursor to the current business cycle downswing becoming even more pronounced in the period ahead."
According to the Reserve Bank, SA is 43 months into the current business cycle downswing, marking the second-longest downturn in SA’s history.
"For the RMB/BER BCI to have fallen in the way it has, so late in the current downturn, is concerning to say the least," said RMB.
While the 2009 recession was eased by fiscal policy and interest rate cuts, RMB said, the current sovereign credit rating pressures meant providing fiscal stimulus was not an option.
Instead, political certainty and rebuiliding trust between the private sector and government would help lift confidence.