Business confidence index falls as pessimism takes hold

The South African business community was more pessimistic in the final quarter of this year, a poll by Stellenbosch University’s Bureau of Economic Research (BER) released yesterday showed.

The BER’s business confidence index fell to 38 from 42 index points in the third quarter, the RMB- sponsored poll of 1 600 respondents found.

South Africa’s low business confidence is often cited as a concern by credit ratings agencies.

“Simply put, without a notable improvement in sentiment, the economy will remain stuck in first gear,”

Rand Merchant Bank chief economist Ettienne le Roux said.

Although South African business people are more gloomy than they were three months ago, the reading is still higher than the 32 index points recorded six months ago in the second-quarter survey.

“The low point in the index may thus well be behind us,” Le Roux said.

The BER attributed the improvement in confidence in the third quarter to the hype surrounding the local elections.

Building was the only sector to show increased optimism in the fourth quarter, with building contractors’ confidence rising to 48 from 44.

Confidence among retailers, which jumped from 26 points in the second quarter to 43 in the third quarter, fell back to 34 points as the peak Christmas shopping period approaches.

“In addition to continued subdued growth in real household income, the application of new and stricter regulations for the granting of in-store credit also depressed sales volumes,” BER said.

Wholesalers remained fairly optimistic, with their business confidence index declining to 53 from 56 points.

Manufacturers remained at 30 points.