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New leadership could boost 'flatlined' business confidence - report

Nov 28 2017 14:06
Lameez Omarjee

Johannesburg – With business confidence levels still low and all eyes on the outcome of the ANC elective conference in December, strong new political leadership could provide a much-needed boost, according to a report.

The RMB/BER Business Confidence Index (BCI) for the fourth quarter, released on Tuesday, showed that confidence “flatlined” at 34, with levels below the 50 mark indicating pessimism remains widespread. The survey, conducted in the first three weeks of November, covered 1 600 senior business people in the building, manufacturing, retail, wholesale and motor trade sectors.

The low confidence reflects the private sector’s “wait-and-see” stance, said RMB chief economist Ettienne le Roux. “What will change this, and so help to kick the economy into gear, is the emergence of a strong new political leadership with the determination to implement market-friendly policies and to root out corruption.”

Le Roux stressed the importance of the outcomes of the ANC elective conference by referring to ratings agency Moody’s decision on Friday to place the country on a 90-day rating reprieve. “The government has a narrow window of opportunity to put in place an action plan to change the country’s longer-term growth prospects for good. We need bold and unpopular solutions for the jam South Africa is in.”

On Friday ratings agency S&P downgraded South Africa's long-term local currency rating to BB+, or junk, from BBB- with a stable outlook, Fin24 reported. Analysts have warned that the downgrades could trigger further volatility.

Earlier in November another index, the Grant Thornton International Business Report for the third quarter of 2017, showed that the majority of surveyed business executives were delaying business expansion plans as they wait for certainty and economic stability.

The RMB/BER report indicated that the “sideways” movement in the index resulted from an improvement in motor trade confidence which was offset by a deterioration in confidence for retail trade, building contractors and the manufacturing sector.

“Motor trade confidence increased by 13 points from a low 19 in the third quarter as business conditions and new vehicle sales improved somewhat further,” the report read. Building confidence fell from 44 to 34, as a result of challenging conditions in the non-residential sector.

Retail confidence dropped from 38 to 29, as was reported 18 months ago. “Clothing retailers had it particularly bad in the fourth quarter, while food retailers continued to struggle as well, due to weak profitability.”

Confidence levels for retailers in durable consumer goods improved, given a recovery in sales volumes and a slight increase in pricing power. “The jury is still out whether Black Friday and the approaching festive shopping season will have lifted retailers’ profitability in the fourth quarter as a whole.”

Manufacturing confidence declined from 27 to 24. “With domestic sales volumes having remained under pressure, the deterioration during the fourth quarter would have been even more pronounced had it not been for a noticeable export-led recovery in production volumes,” the report read.

“Export order volumes also improved on the back of still-vibrant global trade conditions.

“Needless to say, the general political climate remained a bugbear, continuously weighing down on business sentiment. Lower profitability also dampened confidence.”

Wholesale confidence increased from 48 to 51.


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