Ina Opperman

By Ina Opperman

Business Journalist


Perfect storm of bad news leads to another decline in business confidence

Business confidence in South Africa seems to be a rollercoaster ride, picking up before it declines again.


This is why business confidence has declined again: the foreign trade account with less imports and exports, with the rand exchange rate, impact from inflation and uncertainty of energy supply adding to the negative mix.

The South African Chamber of Commerce and Industry (SACCI) Business Confidence Index (BCI) declined by 2.1 index points between October and November to 92.8 and by 0.6 index points between November 2021 and November 2020, while the BCI averaged 94.0 for the first eleven months of 2021, 8.2 index points higher than the 85.8 average for the same period in 2020.

The BCI had a severe decline in April-May last year due to the first level 5 lockdown, but since then business confidence gradually recovered lost ground, reaching around 96.5 in May-June 2021, a level last experienced towards the end of 2018.

However, despite the looting mayhem in July 2021 put a brake on the upward momentum and had a negative impact on business and investor confidence, the BCI recovered to 94.9 in October, mainly driven by more social stability and favourable developments regarding global commodity prices and a more economic and business responsible approach to lockdowns.

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Trade account pulls down business confidence

The foreign trade account was the main malefactor that pulled the BCI down month-on-month and year-to-year. Less import and export volumes contributed to the decline in foreign trade in November.

The rand exchange rate also had a negative influence on business confidence between October and November, but not so much compared to November 2020. A number of events and developments in October and November affected the global and local economy that influenced the business climate, with some economies experiencing positive and negative issues simultaneously, while others still had to deal with pre-Covid issues.

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These business confidence issues will remain

Although Covid-19 will possibly move to the endemic stage early in 2022, some negative issues will still arise and remain, requiring active and rational management and economic policy stances. These issues include:

  • Anticipating that China could run out of coal and experience power shortages, as coal is responsible for about two-thirds of China’s electricity generation and contributed to the worst power cuts in a decade, hurting the country’s growth.
  • Global supply chain bottlenecks due to the rapid spread of the Delta variant that also affected delivery timelines and manufacturing output.
  • Lifting lockdown restrictions caused a demand spike that affected supply chains and notably manufacturers.
  • Brexit for instance caused a shortage of truck drivers in the UK.
  • Major economies are struggling with a shortage of specialised manpower, to some extent caused by unemployment benefits and social grants due to Covid-19 providing alternative easy income to households.
  • Some countries are facing logistical problems at ports as world trade started to accelerate and normalise.
  • Higher inflation is expected in global context rising by 2 percentage points to about 3%, 11% in sub-Saharan Africa and 5.5% in emerging markets.
  • The SA Reserve Bank raised the repo rate by 0.25 percentage points to 3.75%.
  • In South Africa, the radical civil unrest in July highlighted the risk to logistics, law and order, the destruction of trade facilities and food security, adding an undesirable negative dimension to the economic recovery.
  • An additional aggravating matter for South Africa’s economic recovery is certainty of energy supply by Eskom.

A major concern for many economies affected by Covid-19 measures is the inescapable dilemma of the costs of services the welfare state provides, such as health care, education and social grants that increase faster than what the economy can afford.

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Looking ahead

Improved vaccine application has supported economic recovery and led to a sense of return to economic and business normality, which makes it important how the Covid pandemic is managed and communicated.

SACCI believes that more effort is needed to promote the health advantages of being vaccinated and how much medical science has improved the lifestyle of all citizens.

“The present lockdown came from external sources and is a blow to economies emerging from the devastation of the Covid virus and we welcome how the South African government is handling the restrictions with due consideration of the economic, fiscal, business and health implications.”

Many developing and emerging market economies such as South Africa have to deal with various structural difficulties and would therefore appreciate a more amiable/considered process when embarking on regulations and restrictions to deal with the Covid pandemic and even the remnants of endemic Covid.

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Positive contribution to business confidence

Apart from the negative impact, the main positive contributions on a month-on-month basis were from more new vehicles sold that improved output by manufacturing as well as higher share prices on the JSE and increased real value of building plans passed.

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