Trade conditions remained constrained in October

Trade conditions in South Africa remained constrained in October and businesses believe they are worse off than a year ago. However, some businesses still support a positive outlook for trade conditions over the next six months.

According to the October 2023 trade environment survey conducted by SACCI, the sector is facing increasing pressure, with current as well as anticipated trade conditions receiving negative evaluations.

Only 35% of respondents expressed positivity regarding current conditions, while 53% are hopeful for improvements over the next six months. A significant majority of respondents (56%) said the current trade conditions are worse than in October 2022.

It is not difficult to see why businesses are so negative, since 70% of respondents noted a decline in sales volumes, while only 32% reported an increase in new orders.

“Input costs showed some signs of relief, although subdued demand restricted the escalation of sale prices. Consequently, it is anticipated that inflationary pressures will further ease with a less stringent monetary policy,” Richard Downing, SACCI’s economist, says.

“Bleak expectations also dampened the mood, resulting in a somewhat subdued Black Friday, with spending primarily focused on semi and non-durable goods.”

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Positive outlook for trade conditions for next six months

Despite the current constrained trade conditions, the expectations for the next six months which fall within the scope of the survey continued to support a positive outlook for businesses.

New vehicle sales are under pressure, reflecting the complexities of the trade landscape as they perform slightly below 2022 levels. Recent data releases also indicate a negative trend in retail trade volumes, whereas foreign trade is exerting a positive influence on the economy.

“Given the role it plays in the trade environment, nurturing foreign trade relations is of utmost importance. The growth in inbound tourism had a positive impact on trade conditions, particularly within the small, medium and micro-enterprise (SMME) sector.”

The survey also indicated that respondents continue to face limitations on activity due to constrained electricity supply.

“However, business resilience and adaptability facilitated the exploration of alternative solutions,” Downing says.

Marketing also emerged as an additional challenge in recent times, while respondents also expressed concerns about the poor state of the investment climate and the negative impact of South Africa being on the grey list, as it undermines global perceptions. Instances of corruption and lawlessness have made even divestments a challenging endeavour.

In addition, the restricted trade conditions adversely affected employment opportunities, with only 35% of respondents hiring new staff in October. Nevertheless, 45% of the respondents consider the possibility of recruitment over the next six months.