As concern mounts about a possible downgrading of South Africa’s credit rating, the latest RMB\/BER business confidence index (BCI) shows close to 60 percent of local respondents remain unhappy with prevailing business conditions.<\/p>\n
According to the Rand Merchant Bank (RMB) sponsored Bureau for Economic Research (BER) index, released on Tuesday, business confidence remains unchanged at a low 41 points in the second quarter of this year.<\/p>\n
“This implies that close to 60 percent of respondents continued to be unhappy with prevailing business conditions. The BCI has been hovering around the 40 index point level for a year now,” RMB said in a statement.<\/p>\n
The RMB\/BER BCI reflects the results of a survey conducted among 2500 companies between May 5 and June 3 this year.<\/p>\n
“Events that could have influenced sentiment to various degrees in the second quarter were: the platinum sector strike, which is now in its fifth month, other smaller strikes (sugar), as well as the threat of industrial action in the metals and engineering sector.<\/p>\n
“Confidence might also have been impacted by spill-over effects from the country-wide power outage in March, the large number of public holidays in April, and the national election (and subsequent new Cabinet appointments) in May.”<\/p>\n
RMB said the “stable” headline BCI number hid substantial, and “for the most part, worrying underlying changes”.<\/p>\n
Manufacturing confidence had dropped from 41 to 25 index points — the lowest level since the economic upswing started in 2009.<\/p>\n
“The deterioration in sentiment can mainly be attributed to lower sales volumes and a related deterioration in profitability.”<\/p>\n
The bank said the BCI remaining unchanged at a low 41 points could be reflective of the economy already being in a technical recession (defined as two consecutive quarters of negative GDP growth).<\/p>\n
However, for the year as a whole, real GDP could still expand by around 1.5 percent to two percent.<\/p>\n
“If the services sector, coupled with agriculture and construction, more or less maintained their first quarter growth momentum, a return to more normal conditions in the platinum industry would give the economy a kicker in the second half of the year”, it said.<\/p>\n
On Friday this week, rating agencies Standard & Poor’s and Fitch are widely expected to downgrade South Africa’s local currency credit rating from A- to BBB+.<\/p>\n
Some analysts believe this will cause nervousness among investors about future downgrades, and prompt a fall in the rand.<\/p>\n
Rating SA\u2019s socio-economic minefield<\/a><\/strong><\/p>\n S&P cuts South Africa\u2019s rating<\/strong><\/a><\/p>\n