Business Maverick

Business Maverick

Mixed South African economic signals as business confidence falters 

Container ships are docked as shipping containers sit in the Busan Port Terminal (BPT) in this aerial photograph taken in Busan, South Korea, on Tuesday, Oct. 13, 2020. South Korea’s central bank left its key interest rate unchanged on Wednesday amid signs that a resurgence of the coronavirus at home is waning and exports and inflation are picking up. Photographer: SeongJoon Cho/Bloomberg

The RMB/BER Business Confidence Index (BCI) faltered again this quarter, highlighting the perilous state of South Africa's economy. But the February reading of the BankservAfrica Economic Transaction Index (BETI) suggests some green shoots. 

Seven out of 10 senior South African business executives are dissatisfied with prevailing business conditions. This is according to the latest RMB BCI, which is based on a survey of around 1,300 executives. The BCI declined to 35 from 40 in the previous quarter, when six out of 10 executives were bearish about the local business environment. 

RMB said the survey “was conducted mainly during the second half of February when the peak of the second wave of COVID-19 infections had passed, and certain restrictions (such as the complete ban on alcohol sales and access to beaches) were already lifted. Load-shedding was also less pronounced during the survey period. That confidence failed to improve further is therefore telling.”

“Confidence fell across all the five sectors making up the RMB/BER BCI. Retail saw the biggest decline, followed by manufacturing and new vehicle dealers. Sentiment among building contractors and wholesale traders deteriorated slightly. Except for the wholesale trade, confidence in every other sector remained well below the 50-point neutral level i.e. in net negative terrain,” RMB said. 

This suggests that the recovery remains fragile at best, which is no shocker in the wake of a 7% contraction in South Africa’s gross domestic product (GDP) in 2020, the biggest decline in output by some calculations in a century. Plenty of headwinds remain; load shedding, rising power costs, the snail’s pace of the domestic vaccine rollout, the potential for a third pandemic wave, and political risks linked to ANC infighting, to name just a few. At 35, the BCI towers over its historic low of 5 points reached in the second quarter of last year during the initial hard lockdown, but it remains deeply in negative territory. 

Other data is not quite so depressing. 

The BankservAfrica Economic Transaction Index (BETI), calculated by, measures transactions between South Africa’s banks. In Feburuary, it recorded a bounce in the right direction for the economy.

“Economic transactions reflected a strong monthly rebound of 2.2% in February 2021. The easing of the lockdown restrictions on 1 February 2021 gave the economy a much-needed boost and change from the weak numbers presented in January 2021. The economy seemed to be performing better than expected – even as some restrictions remained in place,” said. 

So the economic signals are mixed at the moment and more data is needed to provide a picture of what the economy’s performance may be this quarter. On Thursday, Statistics South Africa will release January data on mining and manufacturing production and sales, and next week retail sales for the month. There is no doubt that the recovery is frail, but at least there appear to be some green shoots. DM/BM 



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