Business confidence troughed in May before ticking up
Confidence is still well below 2019 levels, with Sacci questioning the government’s handling of the lockdown and virus-related corruption
Business confidence troughed during May, surpassing the plummet experienced during the severest phase of the lockdown, according to data from the SA Chamber of Commerce and Industry (Sacci) on Wednesday.
Following the fall to 70.1 index points in May, its lowest level since the index began, business confidence picked up during June and July when it reached 82.8 points, according to the latest Sacci business confidence index.
However, confidence levels remained well below those during 2019, the chamber said in a statement, with the momentum of the recovery slowing between June and July.
Amid limping confidence, Sacci — which represents about 20,000 small, medium and large businesses across the economy — questioned the government’s handling of the lockdown and its ability to route out the corruption that has manifested in the procurement of goods needed in the fight against the pandemic.
Business confidence is seen as a necessary precursor to investment in the economy, which is critical to boosting growth and helping create jobs.
Fixed investment has become a rallying cry for business and policymakers as a way to reboot the economy after the ravages of Covid-19, which is expected to see GDP contract by more than 10% according to certain private-sector estimates.
But the government’s handling of the lockdown, including its continued ban on alcohol and cigarettes sales, has already caused the likes of major drinks manufacturers, such as Heiniken and AB InBev’s local arm SAB, to backtrack on billions of rands’ worth of investment plans.
Even before the lockdown, SA’s economy was in recession, with unemployment rising to a record high of 30.1% during the first quarter of the year.
Sacci questioned whether the lockdown has been effective in achieving the government’s stated public healthcare benefits, given the “devastating effect” it has had on businesses, households, government revenues and spending.
Allegations of corruption
“It was essential for SA to manage and balance the punitive effects of the lockdown process on business and the economy, with the need to contain the public-health effects of the Covid-19 pandemic,” Sacci said. “Getting this balance right should have meant that, while the economy was in lockdown, the intended public-health benefits of containing the pandemic were visible.”
Instead, the benefit to public health “is not as clear, given the exponential rise in positive cases, hospital admissions and mortality numbers in this period”, the chamber said.
It also questioned whether the state has “the will and the capability” to act on allegations of corruption that have dogged the ANC and government officials, who are accused of inserting family and friends into lucrative public-sector tenders related to the state’s Covid-19 response.
“This is damaging SA’s recovery effort and brings into question the new administration’s intent to stamp out corruption,” Sacci said.
It is also sceptical of President Cyril Ramaphosa’s decision to set up a cabinet committee to deal with the corruption allegations in the procurement chain.
“Perhaps the time has come for the government to pause, reassess and re-evaluate its own cabinet resource capabilities, by inquiring whether certain of its cabinet committees have the required level of competence, grit and experience to handle the big tasks,” Sacci said. “Otherwise, the government could end up contracting a bad condition of ‘not knowing what they don’t know’, and this generally leads to delusion and self-deception.”
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