Business confidence in South Africa has plunged to levels last witnessed in 2009 after the global financial crisis, according to the RMB/BER Business Confidence Index (BCI) figures released on Wednesday.
The BCI collapsed by 11 points to 29 in the second quarter of 2017 as confidence declined across all of the five sectors of the economy surveyed. The index registered between 32 and 42 points over the last year, suggesting the latest decline "might signal that the current business cycle downswing is becoming even more pronounced", according to the Bureau for Economic Research.
According to Fin24, seven out of 10 respondents were pessimistic about business conditions. This follows 43 months of an ongoing downswing in business confidence, the second longest in South Africa's history since the downturn between 1989 to 1993.
"For the RMB/BER BCI to have fallen in the way it has, so late in the current downturn, is concerning to say the least," the report warns according to Fin24.
"While the Cabinet reshuffle and consequent sovereign credit rating downgrades undoubtedly played a role, confidence was also knocked hard by persistently weak business activity."
Low business confidence = low investment. Low investment = low growth.— sizwe nxedlana (@sizwenxedlana) June 14, 2017
Decline across sectors of the economy
All five sectors covered in the survey -- retailers, wholesalers , motor traders, manufacturers and the building contractors -- have a BCI below 50 which has happened only in 12 instances over the past 42 years. According to Fin24, the report indicates this is not a regular occurrence, the last of which took place during the financial crisis when the country experienced a cyclical domestic economic downturn.
The biggest drop in confidence was recorded in the motor trade sector, plunging 19 points to 11 in the second quarter of 2017. Manufacturing was second in line, declining 12 points to 16.
RMB/BER business confidence falls to 29. Meaning 7 out of every 10 respondents are dissatisfied with business conditions.— sizwe nxedlana (@sizwenxedlana) June 14, 2017
SA enters technical recession
Statistics South Africa (StatsSA) on Tuesday June 6 announced the country had entered a technical recession.
A release on the country's latest gross domestic product (GDP) figures by Stats SA revealed the economy has experienced two consecutive quarters of contraction, demonstrating a downward slump since late last year.
GDP shrank by 0,7 percent between October and December 2016 and a further 0,3 percent between January and March of 2017 compared with the previous quarters. Stats SA said large decreases in the trade, catering and accommodation industry as well as shrinking manufacturing mostly account for the dip into technical recession.
Meanwhile, ratings agency Moody's on Tuesday announced it downgraded the credit ratings of Eskom, Sasol, MTN, Acsa and seven other South African corporates, News24 reported on Wednesday.
This follows the decision by Moody's to downgrade South Africa's long term foreign and local currency debt ratings by one notch, with a negative outlook, on Friday. On Monday, South Africa's top five banks, three development finance institutions, certain City Power and Sanral credit ratings and 10 regional and local governments were downgraded, News24 reported.