After Ramaphoria-inspired upswing, business confidence slumps
The surge in confidence following President Cyril Ramaphosa’s election is beginning to wear off.
After leaping from 34 to 45 in the first quarter, the RMB/BER business confidence index (BCI) deteriorated to 39 in the second quarter of 2018.
"This means that close to three-fifths of respondents now regard prevailing business conditions as unsatisfactory — a disappointing outcome, yet probably an accurate reflection of reality," RMB said on Wednesday.
The second-quarter survey was conducted between May 7 and June 5, and included 1,700 business people in the building, manufacturing, retail, wholesale and new vehicle trade sectors.
In the first quarter, the huge leap confidence was attributed to the euphoria surrounding Ramaphosa’s election and the swift political change. However, confidence hasn’t filtered through to the real economy yet as seen by the weak economic performance in the first quarter.
"We noted at the time that it would be unusual for confidence to be sustained after such a significant jump. Moreover, we felt that as the excitement was likely to wear off, and the reality of still subdued economic activity kicked in, confidence would soften in the second quarter," RMB said.
"Ramaphoria faded in the wake of the ever-rising petrol price, the [intensifying] political debate around expropriation of land without compensation and growing signs that the strong, synchronised global economic upswing has started to fizzle out."
After jumping from 34 to 41 in the first quarter, building contractor confidence fell to 37 in the second quarter while retail confidence retreated to 33 following a 13-point rise to 42 in the first quarter. New vehicle dealer confidence dropped from 52 index points to 35 in the second quarter, and manufacturing confidence fell from 37 to 27.
Wholesalers, however, were the exception with confidence jumping from 53 to 62.
Last week, the South African Chamber of Commerce and Industry (Sacci) BCI also fell slightly. While the BCI was 0.8 index points up on the May 2017 level, it fell by two index points between April 2018 and May 2018 to 94.
A lack of performance by local authorities "is affecting businesses operating in municipalities and in service-delivery areas, curtailing their ability to expand and create employment," Sacci said.
"Once investment and employment creation are reinstated, business confidence should shed short-term variations and enhance economic growth and participation."