{"id":789608,"date":"2024-09-04T11:55:28","date_gmt":"2024-09-04T09:55:28","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=789608"},"modified":"2024-09-04T11:55:33","modified_gmt":"2024-09-04T09:55:33","slug":"positive-turn-for-businesses-in-south-africa-but-confidence-is-still-low","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/789608\/positive-turn-for-businesses-in-south-africa-but-confidence-is-still-low\/","title":{"rendered":"Positive turn for businesses in South Africa – but confidence is still low"},"content":{"rendered":"\n

South African businesses are cautiously optimistic about business conditions, but over 60% are still not satisfied with the prevailing business conditions. <\/p>\n\n\n\n

The RMB\/BER Business Confidence Index (BCI) rose by three points to reach 38 in Q3 2024. <\/p>\n\n\n\n

“This is the first business sentiment survey in South Africa following the formation of the Government of
National Unity (GNU) and reflects cautious optimism about improving business conditions,” said RMB.<\/p>\n\n\n\n

“Although respondents still noted constraints, especially weak demand, they were less negative
about current conditions and, encouragingly, were more upbeat about business conditions going
forward.”<\/p>\n\n\n\n

“For the first time since early 2022, a slight net majority of respondents across the different sectors expect business conditions to improve in the next quarter.” <\/p>\n\n\n\n

The three-month increase has brought the BCI to its highest level since Q4 2022. <\/p>\n\n\n\n

At the current level, just under four out of ten respondents were satisfied with prevailing business conditions. <\/p>\n\n\n\n

Of the five sectors that comprise the BCI, wholesalers and building contractors saw a decline in confidence but are still at relatively high levels. <\/p>\n\n\n\n

Manufacturing remained unchanged, and retailers and new vehicle dealers saw an improvement in confidence. <\/p>\n\n\n\n

New vehicle dealers saw the most significant increase in confidence, rising by 17 points to 27 in Q3 – a one-year high. <\/p>\n\n\n\n

“However, despite the big surge, the sector remains the most pessimistic with less than three in ten respondents satisfied with prevailing business conditions.”<\/p>\n\n\n\n

“Business confidence in the sector has been extremely depressed over the last three quarters, with less than two in ten surveyed respondents satisfied with prevailing business conditions.”<\/p>\n\n\n\n

“Be that as it may, the sector seems to have bottomed and is slowly recovering.”<\/p>\n\n\n\n

Moderating inflation and a reduction in interest rates should support household disposable income in the near term. The South African Reserve Bank is widely expected to cut interest rates later this month.<\/p>\n\n\n\n

In spite of a two-point drop, the wholesale trade was still the most optimistic sector surveyed, with more than half of respondents happy with the prevailing business conditions. <\/p>\n\n\n\n

At 51%, it is six points better than the long-term average reading of 45%, supported by the underlying data that generally reflects upbeat conditions. <\/p>\n\n\n\n

Although total sales volumes were unchanged from Q2, underlying trends moved in opposite directions. <\/p>\n\n\n\n

Wholesalers of consumer goods also saw lower sales compared to Q2, but it is still performing better than the long-term average. <\/p>\n\n\n\n

Wholesalers of non-consumer goods, however, saw consumer goods reported that their sales performed better compared to Q2 2024, with volumes in line with the long-term average reading. <\/p>\n\n\n\n

Retail trader confidence also improved from its long-term average of 39 index points to an above-average 45 index points. <\/p>\n\n\n\n

“While actual retail sales volumes could be somewhat lower in the third quarter of 2024 compared to the strong sales seen during the same period in 2023, durable and semi-durable traders’ sales volumes improved in the third quarter while that of non-durables declined.” <\/p>\n\n\n\n

The outcome for building contractors was disappointing. Confidence fell by 6 points to 41 index points after a five-point increase in Q2.<\/p>\n\n\n\n

Although the current level is roughly in line with the confidence readings seen in 2023, a recent trend of outperformance by the non-residential sector continued in Q3, with the residential sector under significant pressure. <\/p>\n\n\n\n

Lastly, confidence in the manufacturing sector remained unchanged at 28 index points following a general improvement in assessing current business conditions. <\/p>\n\n\n\n

“However, conditions in the manufacturing sector deteriorated, with a decline in export and domestic demand contributing to a decline in production.” <\/p>\n\n\n\n

“Most notable was a significant decline in the seriousness of the general political climate as a constraint on business and investment decisions. Indeed, forward-looking investment outlays turned notably more positive in the third quarter.”
<\/p>\n\n\n

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Bottom line <\/strong><\/p>\n\n\n\n

The overall improvement in sentiment was likely due to a continued absence of load shedding and the end of the political uncertainty following the May 29 election. <\/p>\n\n\n\n

That said, with the continued pressure on local consumers and a sluggish export demand noted by manufacturers, there was not enough demand to see a faster uptick in sentiment. <\/p>\n\n\n\n

Activity did not materially improve compared to Q2, where GDP increased by 0.4% quarter-on-quarter in the second quarter after a (Revised) flat performance in Q1. <\/p>\n\n\n\n

Another positive outcome is expected for Q3, but a recovery in demand will be required to get momentum going. <\/p>\n\n\n\n

\u201cFortunately, the widely anticipated interest rate cut in South Africa later this month, on the back of lower consumer inflation and a boost from the introduction of the two-pot retirement system, should spur
domestic demand through the remainder of the year,” said Isaah Mhlanga, chief economist at RMB, <\/p>\n\n\n\n

“This should benefit sentiment, but logistical constraints remain top of mind and must be urgently tackled to support a sustained lift in business confidence\u201d. <\/p>\n\n\n\n

The improvement in the forward-looking investment indicator is an encouraging sign and could lead to economic growth, but RMB cautioned that higher confidence is needed for this to materialise. <\/p>\n\n\n\n

Speaking at a media luncheon last week, South African Reserve Bank Governor Lesetja Kganyago said that improving sentiment is not only a strong way to boost the economy but also free. <\/p>\n\n\n\n

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South Africa shouldn’t ‘let a good crisis go to waste’<\/a><\/blockquote>