The Rand Merchant Bank (RMB)/Bureau for Economic Research (BER) Business Confidence Index (BCI) fell from 18 points in the first quarter to a mere five points in the second quarter of the year.

The BER says this was the lowest level ever recorded since the BER first began conducting the survey in 1975.

The BCI reading confirms that just about every respondent in the second quarter was unsatisfied with prevailing business conditions.

The BCI for the second quarter surveyed 1 800 executives across building, manufacturing and domestic trade sectors, including retail, wholesale and motor trade.

The business confidence measurement came at a time when many businesses were prohibited from operating or could only operate on a limited scale, barring those producing essential goods and services.

The BER explains that, until now, the lowest BCI on record was 12 points measured in the third quarter of 1985 and again 12 points measured in the fourth quarter of 1977. In both these cases, the falling confidence was a result of uniquely adverse political developments in South Africa.

By contrast, business confidence in the second quarter of this year collapsed primarily owing to the unexpected emergence and spread of Covid-19 and the lockdown measures that followed.

Contributing to the drop in the overall BCI, retail confidence dropped from 18 to 11 points.

Further, motor trade confidence fell from 16 points in the first quarter of the year to two index points in the second quarter.

Building activity confidence dropped from 15 points to two points over the two quarters, while manufacturing confidence dropped from 17 points to six points.

Wholesale confidence fell from 25 points registered in the first quarter of the year to four index points in the second quarter.

The BER says the plunge in the BCI will be consistent with a contraction in real gross domestic product growth like never seen before.

The road to recovery will be slow and bumpy, the bureau says, especially since many construction projects have been cancelled, while manufacturers have cut back on fixed investment.

“If left unchecked, some of these restrained economic activities can have a lasting impact on the South Africa’s long-term growth potential,” comments RMB chief economist Ettienne le Roux.