Business confidence continues to drop

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The business confidence index, compiled by Rand Merchant Bank and the Bureau for Economic Research at Stellenbosch University, shows that business confidence dropped from 34 to 31 in the final quarter of 2018. Confidence plummeted from 40 to 34 in the third quarter, suggesting that despite President Cyril Ramaphosa’s best efforts there is little optimism in the private sector.

“While President Ramaphosa’s refreshing new focus on public-private-sector partnerships is welcome, the reality is, a multitude of political and policy issues (chief amongst which is the uncertainty around the government’s land reform plans), continue to weigh down on confidence. Unless these are resolved in a more speedy and concrete fashion, private sector fixed investment and, by implication, economic growth will remain disappointingly low,” said Ettienne Le Roux, chief economist at RMB. “Time is running out as global headwinds are mounting and domestically inflation as well as policy interest rates have bottomed.”

In terms of the five sectors making up the RMB/BER BCI, sentiment deteriorated in two (motor trading and building) and increased in three (manufacturing, retail and wholesale trade). The unusually large drop in new vehicle dealer confidence prevented the index from rising for the first time in almost a year. Retail trade showed the biggest improvement, with its BCI rebounding from 23 in the third quarter to 33 in the fourth quarter (still low, but a big jump). Even before ‘Black Friday’, sales volumes improved a little with retailers of durable goods doing better than most other retailers.

The research was conducted before the 25-basis point interest rate hike of last week, the cabinet reshuffle and ‘Black Friday’.