Jun 07, 2012
Domestic, global uncertainties weigh on business sentimentBack
Engineering|Johannesburg|Africa|Building|Building Contractors|Components|Copper|Efficient Group|Export|Merchant Bank|Africa|Europe|South Africa|Manufacturing|Dawie Roodt|Hugo Pienaar|Sacci
© Reuse this
This is according to the Rand Merchant Bank's and the Bureau of Economic Research’s (RMB/BER) Business Confidence Index (BCI) released on Thursday.
The RMB/BER BCI fell by 11 points to 41 in the second quarter of 2012, following a marked increase in the first quarter.
Efficient Group economist Dawie Roodt told Engineering News Online that the falling exchange rate and deteriorating equity market in South Africa, brought on by international economic uncertainty, also contributed significantly to weakening business confidence.
“It is unclear what will happen in Europe, which leads to severe uncertainty in terms of the future and therefore also affects local business confidence. What is clear, though, is that should the European economy implode, it would be bad for all of us,” Roodt said.
BER senior economist Hugo Pienaar said at the BER conference, in Johannesburg, earlier in the week, that decreasing confidence was resulting in the domestic corporate sector keeping its money in cash, rather than employing it in fixed investments.
He added that the current pressure on the rand could persist in the short term, or until the outcome of the Greek elections was known.
However, Pienaar remained optimistic, stating that the rand could show significant recovery towards the end of 2013, provided the global economy takes an upward turn.
Heightened risk to global growth also resulted in a sharp price fall in key commodities such as oil and copper, which further hindered business confidence.
The RMB/BER BCI showed that the mood during the second quarter soured in four of the five business sectors making up the index.
Retail confidence fell from 61 index points in the first quarter to 39 in the second, the lowest level in two years. RMB and the BER attributed the fall mainly to weaker growth in sales volumes across all types of retailers.
Manufacturing confidence plunged from 47 index points to 29, despite domestic and export sales volumes holding up in the second quarter. Rising inventory levels relative to expected demand, as well as shortened delivery times of orders received underscored the concerns.
New-vehicle-dealer confidence also declined from 73 index points to 65, in large part owing to noticeably slower growth in sales.
Sentiment among building contractors deteriorated from 31 to 24 index points in the second quarter. The decrease stemmed mainly from nonresidential contractors, whose confidence fully reversed its first-quarter gain.
However, wholesale business confidence increased modestly from 48 to 50 index points on the back of improved sales of nonconsumer and consumer goods.
“Given deteriorating prospects for consumer spending, as well as for exports, the pressure is now even more on fixed investment to come to the economy’s rescue. The sharp drop in business confidence does not bode well for prospective private sector fixed investment, in particular, and economic growth in general.
“If ever there was a time for the government to kick capital expenditure into higher gear, it is now,” RMB and BER stated.
Meanwhile, the South African Chamber of Commerce and Industry (Sacci) BCI for May 2012 declined by a further 1.5 index points to 92.8 - its lowest level in more than nine years.
Sacci's BCI was currently 8.4 index points lower than in May 2011, when it registered 101.2.
Sacci stated that the BCI was marred by notable negative movements in the subindices in May. Only two of the thirteen subindices were positive month-on-month, while the financial and real economic components had just one subindex each that showed positive growth.
Over the medium term, the yearly comparison showed that three of the subindices improved in May, this included household spending, government spending and lower real interest rates.
“The contagion from the economic impasse in Europe is gaining in global impact as faster-growing economies are now also experiencing a slowdown while circular and multiplier effects continue to grow,” Sacci stated.
It added that the lack of alignment across economic policy positions was posing a challenge locally, as business sought policy stability in an increasingly perplexing domestic economy.
Edited by: Mariaan Webb© Reuse this Comment Guidelines (150 word limit)
Creamer Media Senior Researcher and Deputy Editor Online
Other Economy News
Updated 21 minutes ago Trade conditions continued to be in negative territory in September, with the South African Chamber of Commerce and Industry’s (Sacci’s) seasonally adjusted composite Trade Activity Index (TAI) measuring 46, compared with 47 in August. The nonseasonally adjusted TAI...
Updated 50 minutes ago South Africa's loan guarantees to State-owned companies currently stand at R469.4-billion ($35-billion) and the firms have utilised R225.9-billion of the facility, National Treasury Director-General Lungisa Fuzile said on Tuesday. The government has vowed it would...
Updated 3 hours ago The African Development Bank (AfDB) and the government of Egypt have signed a loan agreement for $50-million from the Africa Growing Together Fund (AGTF) – a $2-billion special fund provided by China and managed by the bank to cofinance bank operations. This...
Updated 23 minutes ago Trade conditions continued to be in negative territory in September, with the South African Chamber of Commerce and Industry’s (Sacci’s) seasonally adjusted composite Trade Activity Index (TAI) measuring 46, compared with 47 in August. The nonseasonally adjusted TAI...
Updated 52 minutes ago South Africa's loan guarantees to State-owned companies currently stand at R469.4-billion ($35-billion) and the firms have utilised R225.9-billion of the facility, National Treasury Director-General Lungisa Fuzile said on Tuesday. The government has vowed it would...
Updated 57 minutes ago While South Africa’s National Treasury has completed most of the preliminary work into the country’s proposed nuclear build programme, all the details, including the cost to the fiscus, remained classified, MPs were told on Tuesday. Briefing Parliament’s standing...
Recent Research Reports
Input Sector Review: Pumps 2015 (PDF Report)
Creamer Media’s 2015 Input Sector Review on Pumps provides an overview of South Africa’s pumps industry with particular focus on pump manufacture and supply, aftermarket services, marketing strategies, local and export demand, imports, sector support, investment...
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
This Week's Magazine
Updated 6 hours ago Engen Driver Wellness, the mobile health awareness initiative, continues to make a tangible difference to the lives of the country’s bulk truck operators with increased driver participation in voluntary screenings and improved health scores. Now in its fifth year,...
At the sixth IQ Business conference held in Sandton last month, a panel of business leaders and academics advocated that business reclaims the initiative to spur growth in South Africa amid fragmented and haphazard political direction. Management consulting firm IQ...
The building industry is an essential component of the South African economy as it contributes about 15% to the gross fixed investment that drives the economy. However, with the country’s economy going through a tough time currently, this, in turn, reflects on the...
The recipients of the 2015 South African National Energy Association (Sanea)/South African National Energy Development Institute Energy (Sanedi) Awards were announced at a ceremony and banquet in Sandton last month. Sanea chairperson Brian Statham named Exxaro CEO...
As South African information technology (IT) firm EOH posted another full year of strong growth, CEO Asher Bohbot, known for his frank words, people-centric management style and stoic humanism, attributed the company’s continued South African and African growth to...