Business confidence retreated towards 34-year lows in March, as the ramifications of the spread of the coronavirus became more apparent.

The SA Chamber of Commerce and Industry (Sacci) business confidence index (BCI) fell to 89.9 points in March from 92.7 in February. This is the sharpest monthly decline since August 2019, when the BCI hit 89.1, and its lowest level since August 1985.

“The exogenous Covid-19 health shock and its economic impact came on top of a tight business climate and a subdued SA economy,” Sacci said in a release on Wednesday. “The economic effect of Covid-19 on trading partners and, lately, on the SA economy became more evident and pronounced towards the end of March.”

The “exceptional negative monthly impacts” came from lower new-vehicle sales, the weaker rand exchange rate against the major trading currencies, and lower share prices — all mainly due to global uncertainty and unpredictability caused by Covid-19, Sacci said.

The BCI comes as SA is in the grip of a 21-day lockdown — needed to slow the spread of the coronavirus. But the lockdown necessitates a near complete halt of business activity barring essential services.

The SA Reserve Bank is forecasting an economic contraction of between 2% and 4% this year as a result, which it estimates could wipe out 370,000 jobs, while about 1,600 businesses have shut their doors.

To pour salt into the country’s wounds, SA has experienced two credit ratings downgrades, from Moody’s Investors Service and Fitch Ratings, leaving the country squarely at sub-investment grade — or junk status.

According to Sacci the downgrade to junk by Moody’s on March 27 — it was the last ratings agency that had SA at investment grade — “did not have a profound effect” on the March BCI as it came late in the month.

“Extraordinary steps and sacrifices by the government, business and households will be necessary over the short term,” Sacci said.

“The long-term effects are not clear, but all efforts should be put in place not to create fear and panic and to put sound economic policy in place to ensure sustainable economic performance after Covid-19.”