After having fallen from 50 to 43 in the third quarter, the RMB/BER Business Confidence Index (BCI) remained unchanged in the fourth quarter of this year.

“The outcome could easily have been better were it not for a variety of factors that kept sentiment subdued,” RMB states.

The fieldwork for the fourth quarter survey took place during the first two weeks of November. It surveyed 1 300 senior executives in the building, manufacturing, retail, wholesale and motor trade sectors.

The third wave of Covid-19 infections, the July unrest in KwaZulu-Natal and Gauteng, transport delays, shortages of inputs and insufficient stocks all hit confidence hard in the third quarter, RMB indicates. 

It says that, although the impact of some of these shocks had faded in the fourth quarter, new ones like the National Union of Metalworkers of South Africa strike and load-shedding emerged, which prevented sentiment from recovering.

Moreover, existing supply chain disruptions and stock shortages have intensified. Confidence declined in all sectors, except for the building contractors sector.

Building confidence jumped from 18 to a still-low 30 points in the fourth quarter. After lagging the residential sector since the onset of the pandemic, confidence in the non-residential sector bounced back noticeably to surpass the BCI of the residential sector.

Improved sentiment among smaller contractors in KwaZulu-Natal stood out, RMB highlights.

However, it says it is unsure how long the improvement in overall building confidence will last; the non-residential property market continues to suffer from oversupply, while the boost from unrest-related re-building will likely prove temporary.

Retail confidence declined marginally from 56 to 52 and wholesale confidence from 55 to 53. These are the only two sectors where confidence has exceeded the neutral 50-point mark and where indices are significantly above long-term averages.

Sector rotation within retail trade continued; sales of non-durable goods subsided, while those of semi-durable and durable goods picked up. Black Friday and festive season sales could amplify this trend if stock levels improve, RMB notes.

Manufacturing confidence declined from 41 to 38. Sales improved noticeably after the third-quarter disruptions, but a string of factors dampened confidence, ranging from a struggle to source enough crucial inputs timeously, production disruptions owing to the aforementioned strike and load-shedding, and escalating cost increases owing to higher prices of raw materials, to increased transport costs and additional expenses related to load-shedding.

New-vehicle trade confidence reduced further from 47 to 41, mainly because new-vehicle dealers also suffered from insufficient stocks. This curbed the number of units sold.

“Thanks to a slight improvement in the composite activity indicator also derived from the survey results, confidence could easily have increased in the fourth quarter. It is a pity that various unfavourable external as well as domestic shocks prevented this from happening.

“Unfortunate too is the likelihood that supply chain disruptions, insufficient stocks, load-shedding and escalating cost increases will prevail for a while longer, so dimming the hopes of a further strong recovery in the RMB/BER BCI any time soon,” comments RMB chief economist Ettienne Le Roux.