Time is not on our side says RMB chief economist

According to an RMB press release, the quarterly RMB / BER Business Confidence Index showed that eight out of every ten respondents to this prestigious survey are ‘unsatisfied with prevailing business conditions.’

The BER takes the percentage of respondents that rates prevailing conditions as satisfactory as indicator or proxy of business confidence. The composite RMB/BER Business Confidence Index (BCI) is the unweighted mean of five sectoral indices, namely that of manufactures, building contractors, retailers, wholesalers and new vehicle dealers.

Business confidence can vary between 0 and 100, where 0 indicates an extreme lack of confidence, 50 neutrality and 100 extreme confidence. The index dropped sharply from the second quarter’s 28 to just 21, its lowest level in 20 years. It reflects the results of a survey of 1,800 business people. The latest survey’s responses were submitted between 14 August and 2 September, which was before the most recent outbreak of xenophobic attacks.

The survey has been conducted by Stellenbosch University’s BER for almost 50 years and has only scored worse in the immediate aftermath of the 1976 Soweto Riots; the 1985 Debt Standstill; during pre-democracy turbulence of 1992; and in following 1998/99 Emerging Market crisis. The economy recovered strongly after those troughs, as did business confidence.

According to the press release, confidence collapsed in four of the five sectors making up the BCI. The biggest declines occurred in the retail and wholesale trades, sectors which until recently have proved to be comparatively resilient.

  • After gradually easing from a relative high of 44 in the first quarter of 2018 to 28 in the second quarter of 2019, retail confidence sank to 17. This is the lowest level in 20 years. In the third quarter sales volumes remained dismal across the board. In September 2018, confidence among wholesalers was still above 50. In the third quarter however, it fell by 13 points to 29, which was a 20-year low.
  • Manufacturing confidence fell from 22 to 16, which is the lowest level since 1999. Growth in production output remained weak, albeit not as dismal compared to the second quarter. Domestic sales also remained weak while export sales worsened.
  • Building confidence dropped from 30 to 23, thereby neutralising all the second quarter’s gains. Residential activity registered the biggest drop-off in ten years, while the weakness in non-residential activity persisted.
  • The only sector that showed an improvement was the motor trade. However, sentiment among new vehicle dealers remained depressed even after confidence rose from 17 to 22 index points – a level consistent with sales volumes still contracting.

Ettienne le Roux, RMB chief economist said that ‘…to further delay growth-boosting reforms that should have been implemented years ago – such as easing of immigration regulations, cutting red tape, auctioning spectrum and simplifying visa regulations – will simply perpetuate this vicious cycle South Africa is currently in. Time is not on our side, especially now that the global headwinds the country is facing are becoming ever-fiercer.

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