Business confidence improved markedly, but remains in contractionary territory
South African executives have become a lot less pessimistic recently.
The RMB-Bureau for Economic Research (BER) business confidence index (BCI) released on Wednesday showed an 11-point jump from 34 in the fourth quarter of 2017 to 45 points in the first quarter of 2018.
Although still on the pessimistic side of 50 points, RMB said an increase of such magnitude was rare.
"The widespread rise in the BCI had one common cause: the recent turn for the better in domestic politics. To be sure, in the absence of the appointment of Cyril Ramaphosa as the country’s new president and his subsequent Cabinet reshuffle, among other factors, developments around business activity (and profitability) would not have justified the large 11-point jump in the BCI."
The survey covered a total of 1,700 senior executives spanning five sectors and sentiment improved across the board.
New motor vehicle trade registered the largest jump, with an increase of 20 points to 52 in the first quarter, while manufacturing and retail trade both recorded increases of 13 points each. Sentiment among manufacturers improved to 37, and in the case of retailers, to 42. Building confidence soared by seven points to 41.
By contrast, wholesale confidence climbed by a more modest two points to 53.
Last week, the South African Chamber of Commerce and Industry (Sacci) also showed that business confidence had gained significantly with the optimism in the country.
The Sacci BCI pulled back slightly by 0.8 index points in February 2018 to 98.9 following on the improved business mood in January 2017, when business confidence hit its highest level in two years, which increased to 99.7 from 96.4 in December 2017. It increased by 3.4 index points compared with the same period a year ago.
Despite the jump, activity remained sub-par across all the sectors surveyed in the first quarter and the index still remains below the neutral 50-level.
"The first quarter’s jump in the RMB/BER BCI mainly reflects a ‘recalibration’ following the improved political situation in SA rather than a marked improvement in the underlying business landscape."
Finance Minister Nhlanhla Nene said last week that the rise in business confidence had improved the economic outlook.