rand merchant bank ettienne le roux

Rand Merchant Bank chief economist Ettienne le Roux. Photo: Rand Merchant Bank

Q1 2020: SA business confidence tumbles to lowest level in 21 years

A quarterly survey showed that eight out of 10 executives surveyed were unhappy with current business conditions in South Africa.

rand merchant bank ettienne le roux

Rand Merchant Bank chief economist Ettienne le Roux. Photo: Rand Merchant Bank

The confidence of South Africa’s struggling business sector plunged to its lowest in 21 years in the first quarter of 2020, as companies battled challenges ranging from power outages to a falling rand, the coronavirus, continued state-owned enterprise (SEO) bailouts and cash-strapped consumers.

This is according to the Rand Merchant Bank business confidence index (BCI), compiled by Stellenbosch University’s Bureau for Economic Research. The results, released on Wednesday 11 March, show that confidence was at 18 points, down from 26 points for the fourth quarter of 2019.

Eight out of 10 unsatisfied with SA business conditions

The implication is that eight out of every 10 respondents to the survey are unhappy with business conditions. The data is based on responses from 1 800 business executives between 12 February and 2 March 2020.

“Since the survey was completed in early March, things have gone from bad to worse, particularly on the global front…for a small open economy already in recession, the timing of the prospective sharp COVID-19-induced global slowdown could not have been worse,” RMB said in a statement.

Coronavirus-induced disruptions add to tough economy

RMB chief economist Ettienne le Roux added:  “Exports will be hit, tourism flows will be affected, and supply-chain disruptions will be widely felt. All the while when South Africa must continue dealing with the growth-dampening effects associated with the corrective fiscal measures necessary to help stabilise public-sector finances.”

The bank predicted that the index will likely continue to trend lower in the period ahead, which is unsurprising given that the findings predate the South African economy slipping into recession, a possible Moody’s downgrade and the full impact of the coronavirus outbreak.

SACCI’s own confidence index for February showed ‘nervous business conditions’

The South African Chamber of Commerce and Industry (SACCI) publishes its own monthly business confidence index. The February 2020 BCI, released in early March, surprisingly showed a very slight improvement in business confidence. But at the time, SACCI also noted “nervous business conditions”.

“It has become imperative that declining and low levels of business confidence and a non-inspiring environment for fixed investment and slow economic growth call for bold and decisive economic policy decisions,” SACCI said.

“Budget 2020 is no stimulatory budget or even a holding operation, but is born out of desperation to stabilise and begin restructuring the economy to a sustainable position.”

Speaking at the presentation of the First Rand Group’s annual financial results on Tuesday 10 March, CEO Alan Pullinger said South Africa’s economy had deteriorated so sharply that growth had “gone off a cliff” and a recovery could take as long as five years.