The ongoing energy crisis in South Africa is expected to continue dragging business confidence lower in the months ahead as sentiment fell to a four-month low in March.
The South African Chamber of Commerce and Industry (Sacci) said yesterday that the business confidence index (BCI) fell by 0.6 index point to 111.3 in March, from 111.9 in February.
This was the lowest that the BCI has been since November 2022 when it was 110.9 points.
Sacci said the negative month-to month impacts of the declining real value of building plans passed, lower JSE share prices, and rising real interest rates were of concern to business prospects going forward.
From February to March, Sacci said the business environment experienced a rather mixed state of affairs with four of the 14 sub-indices of the BCI turning negative, five being neutral, and five sub-indices making a positive impact on the BCI.
Among these more notable positive sub-indices were increased merchandise export volumes, more overseas tourists and higher new vehicle sales.
Energy supply had a dual effect on the BCI, which was impacted at various levels by electricity supply issues, with electricity blackouts continuing to strain business while the rand price of fuel was relatively stable.
However, the lagged and knock-on effect of electricity supply shortages on the economy and business confidence were of major cost concern.
The negative month-to-month impacts of the declining real value of building plans passed, lower JSE share prices, and rising real interest rates are of concern to business prospects going forward.
Sacci economist Richard Downing highlighted stagnant growth as forecast by the International Monetary Fund, the downgrade of South Africa’s ratings outlook from positive to stable by Standard & Poor’s, and the greylisting by the Financial Action Task Force as challenges to the country’s growth and global competitiveness.
Downing reiterated the need to address the challenges of economic growth, unemployment, poverty and inequality.
“The economy is facing substantial headwinds and a national disruption will not achieve any positive objective as was evident by the lockdowns during the Covid pandemic,” Downing said.
“Given the service delivery problems by the public sector, a transparent and credible performance management evaluation system should be the main consideration in articulating and embedding/retaining of key personnel and succession as a principle.
“At this critical juncture of deepening crises facing South Africa from logistics infrastructure, energy supply, safety and security, immigration, greylisting, health care, education and skills, unemployment, lack of economic growth, to trade and investment, the Cabinet reshuffle does not appear to be aligned to the complex challenges facing South Africa and the long-term objective of eliminating joblessness, poverty and inequality.”
Sacci also said the business climate changed only slightly over the medium-term (year-on-year) with the BCI increasing by 0.8 index point in March 2022 and suggested the degree to which businesses were factoring in a tighter business environment.
Inward tourism and new vehicle sales had a notable positive year-on-year effect on the BCI.
Sacci said the business environment remained sensitive as a number of factors were likely to have an impact on the business eco system going forward.
BUSINESS REPORT