South Africa Business Confidence Plunges

South Africa’s captains of industry sentiment in the first quarter plunged 20.9% between the first quarter of 2018 and the second quarter on the back of policy uncertainty and the weak rand.

The Merchantec CEO Confidence Index tanked from 60 points in the first three months of the year to 47.4 points, a downward spike following the optimism of last quarter’s increase in sentiment, IOL reported.

 “CEOs cited that there are five major contributors to their change in disposition, the “Zuma Hangover”, uncertainties surrounding expropriation of land without compensation, the VAT increase, the fuel price hikes and the rand/dollar exchange rate volatility,” Sabrina Manikkam, a spokesperson for Merchantec said.

Sentiment among chief executives in consumer services sectors recorded the largest decrease, plunging 48.3%.

Industrials decreased by 28.1%, moving to a score of 42.59 points. Merchantec said the confidence decrease in the industrial sector was primarily driven by decreases in economic conditions and planned investment expectations.

The financial services sector recorded a decrease in confidence of 17.4%, attributed to a drop in industry growth expectations. The RMB/BER business confidence index released last month fell 6 points to 39 points from 45 points in the first quarter.

Meanwhile, Stellenbosch University’s Bureau for Economic Research on Friday took a dim view of South Africa’s growth prospects and slashed gross domestic product to 1.4% this year from 1.9% previously.

BER flagged indications that first quarter weakness carried over to the second quarter and policy proposals that are unlikely to achieve the necessary balance between a transformation agenda and enabling business sector growth.

“The initial batch of the second quarter data releases suggests that a strong GDP bounce-back after the first quarter weakness (as was the case in 2016 and 2017) is unlikely. As a result, we have made a meaningful downward adjustment to the real GDP growth forecast,” BER said in a summary of its findings.

South Africa’s economy contracted 2.2% in the first quarter—the biggest contraction since the third quarter of 2009. The agricultural sector, which led the charge in last year’s last quarter growth of 3.1%, saw its biggest contraction since 2006, shrinking 24.2% in the first quarter.

Output in the mining sector shrank 9.9% in the first quarter, while manufacturing production also failed to make a positive contribution to economic growth, falling by 6.4% in the quarter.