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SA business confidence drops to lowest this year

Sep 11 2018 12:37
Ana Monteiro and Ntando Thukwana, Bloomberg

South African business confidence declined to the lowest level this year as industries raised concern about policy uncertainty, including the ruling party’s plan to change the constitution to make it easier to expropriate land without paying for it.

The gauge dropped to 38 in the third quarter, FirstRand’s Rand Merchant Bank unit and the University of Stellenbosch’s Bureau for Economic Research said in an emailed statement on Tuesday. All sectors surveyed were under the neutral level of 50, “an infrequent and worrying development,” RMB and the BER said. This was mainly because of disillusionment about the country’s broad policy direction, it said.

Confidence indexes and agricultural land prices are slumping in part due to the potential constitutional amendment that the African National Congress in December decided is needed to correct racially skewed land-ownership patterns. With elections looming next year, President Cyril Ramaphosa has embraced land expropriation without compensation, but insists there won’t be a land grab and any policy changes won’t be allowed to damage farming production or the economy.

Gross domestic product contracted in the second quarter from the previous three months, landing the economy in its first recession since 2009. The relationship between the index and GDP movements is “historically tight”, so the renewed downward trend in confidence is disconcerting, RMB and the BER said.

“We remain deeply concerned about the prospects,” said Ettienne le Roux, RMB’s chief economist. “The political and policy factors weighing down on business confidence must be resolved to produce impetus for an increase in sentiment,” he said, referring to the ANC’s land-reform plans.

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rmb  |  ber  |  business confidence  |  sa economy
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