Business confidence dips marginally in September as economic recovery slows
Business confidence in South Africa declined in September 2024, dropping 1.3 points to 110.2, according to the South African Chamber of Commerce and Industry (Sacci).
The dip reflects ongoing problems in the economy, despite a steady recovery since June and positive contributions from tourism, exports and lower inflation.
Sacci warned that the recent decline signals growing uncertainty about economic stability, driven by inconsistencies in the government of national unity.
“It appears that there are inconsistencies in the ‘memorandum of understanding’ between partners in the new collaborative administration. Business sentiment showed signs of hesitation, with the Sacci Business Confidence Index slipping marginally in September 2024.”
Business confidence fell by 1.3 index points in September to 110.2 from 111.5 in August — losing the cumulative 3.7 index points it had made from May until August this year.
According to the report, released on Tuesday, only three of the 14 sub-indices had a negative effect on the index in the short-term, with 11 in support of a positive business climate.
“Business sentiment was particularly positively swayed by more overseas tourist numbers, increased merchandise export volumes, an improving manufacturing output and lower inflation.”
“The most notable unfavourable evidence of negative business sentiment was less new vehicles sold, struggling retail sales volumes and the decreased real value of building plans passed,” the report said.
On an annual basis, the September 2024 index increased by two points, driven by higher overseas tourist numbers, higher global precious metals prices, lower inflation, the stable electricity supply and lower fuel prices.
The report also highlighted that the index averaged 110.9 for the first nine months of 2024 compared to an average of 109.2 in the corresponding period of 2023 — a 1.7 index point improvement on 2023.
Municipal performance
In terms of municipal performance, Sacci said it noted with concern that 66 of the 257 municipalities in the country were “officially dysfunctional, rated by certain criteria”.
“Financial management and service delivery are two critical elements of these yardsticks and, accordingly, only 30 municipalities of the 257 are currently regarded as stable but with a further 161 at risk of failure.
“With real fixed investment taking place in these areas it is important that the further demise of municipalities be reversed soon and urgently.” it added.
Even though inflation is improving and dropped to 4.4% in August after three months of slowing, and the South African Reserve Bank lowered interest rates for the first time in over four years in September, the economy is still expected to grow by only 1.5% each year. The current interest rate is 8%.
“The South African economy grew by only 0.4% year-on-year in the first six months of 2024, and in order to achieve 1% real growth in 2024, the GDP will have to increase by 1.5% year-on-year in the second half of 2024.
“Higher real economic growth could, however, only be realised if participating progressive partners in government stick to an understanding as agreed upon. Lower expectations and uncertainty for improved economic conditions will cause business confidence, and more importantly, investor confidence, to dwindle.
“The projection of present tendencies indicates that economic growth may not exceed 1.2% per year over the next five years if structural impediments are not resolved.”
The business environment in eThekwini municipality is on an upward trajectory, according to its own index, also released on Tuesday.
During the third quarter, business confidence increased to 63.01 from 55.49 in the previous quarter. This was on the back of reduced petrol prices as the local currency strengthened and crude oil prices decreased on the international market, uninterrupted electricity supply, lower inflation rates and the recent interest rate cut.