The coronavirus (COVID-19) has hurt the South African business confidence, making it to drop to the lowest level in almost 45 years.
Among the factors sited for the drop include the resources spent in virus prevention measures—particularly the strict lockdown.
What the index says
According to information from Bloomberg News, the second-largest economy in Africa readings started in 1975 showcased, the deep fall, whereas both—Rand Merchant Bank (RMB)unit and Stellenbosch University affirmed that, a quarterly gauge measuring business confidence fell to 5 in the second quarter from 18 in the previous three months.
However, a reading of 5 means “just about every respondent in the second quarter was unsatisfied with the prevailing business conditions,” RMB said. The survey was based on the responses of 1,800 business executives between May 13 and June 1.
Further, as the nation moves away from the harsh-lockdown total of around 1 800 executives surveyed across the building, manufacturing and the domestic trade sectors – including retail, wholesale and the motor trade – are very pessimistic about business conditions ahead as the South African continues to recover from the Covid-19 pandemic.
However, the index pointed business confidence plunge in all 5 sectors, namely retail, new motor sales, building activity, manufacturing and wholesale.
Also, of all the sectors, retail trade is the only sector where confidence did not descend below 10, mainly due to sales of essential goods, such as food and pharmaceuticals, and later winter clothing being allowed, according to News24.
What previous readings said
As South Africa entered into a second recession in two years before the virus outbreak, the business confidence has been falling in different instances.
According to information from News24, the previous lows were registered during the third quarter of 1985 and the fourth quarter of 1977 due to political developments in South Africa.
However, in February, Reuters reported that South African business confidence fell in January, partly because the rand weakened as the spread of the coronavirus hit emerging-market currencies.
The South African Chamber of Commerce and Industry’s monthly business confidence index slipped to 92.2 in January from 93.1 in December, resuming the downward trend seen for much of 2019. Six of 13 sub-indices improved, five turned negative and two were unchanged, SACCI said.
In May, South African business confidence slumped to an all-time low in April depicting the economic impact of the first month of a nationwide lockdown (initiated on March 27), limiting crucial economic operations in most sectors.
A sentiment index compiled by the South African Chamber of Commerce and Industry fell to 77.8 from 89.9 the March.
According to Businesstech, by the time this was considered as the lowest since the index started in 1985 and even worse than the median estimate of 80 by three economists in a Bloomberg survey
South Africa is now taking steps back to normalcy, but things could be challenging as the National Treasury predicts gross domestic product could contract as much as 16.1 per cent this year, depending on how long it takes to contain the outbreak.