Business confidence eases as more realistic outlook prevails

JOHANNESBURG – Business sentiment weakened in January, with executives painting a more realistic outlook compared with the euphoria that swept the market when President Cyril Ramaphosa assumed office last year.

Data from the South African Chamber of Commerce and Industry (Sacci) showed that business confidence eased to 95.1 points from 99.7 points in January last year.

On a month-on-month basis, the index was little changed, measuring 95.1 points compared with 95.2 points in December.

Sacci chief economist Richard Downing said dealing effectively with institutions and individuals involved with adverse business practices in the public domain becomes an important element for restoring confidence.

“Of equal importance is creating the attraction for investors when the Davos investment destination imperatives are implemented. Budget 2019/20 provides a timeous and ideal opportunity to pursue the right investor-friendly climate,” Downing said.

Finance Minister Tito Mboweni is expected to focus the 2019 Budget on supporting growth and stabilising its spiralling debt.  

Bank of America Merrill Lynch last week said it estimated that trailing Budget deficit was over-performing the Medium Term Budget Policy Statement forecast by about R26 billion or 0.5 percent of gross domestic product.

Gavin Smith, head of Africa at deVere Acuma, said the Budget would prioritise political realities over fiscal discipline.

“A pick-up in economic growth since summer 2018 should have supported tax revenues, but doubts over the growth spurt’s sustainability and continuing weak tax collection both persist,” Smith said. 

Sacci said higher share prices on the JSE also contributed positively to the BCI in January compared to December 2018.

However, on an annualised lower, the shares and a weaker rand exchange rate had a negative impact on the index.

Economic activity data so far has shown that the economy began the year on a weaker footing.

Data from the Absa manufacturing Purchasing Managers Index (PMI) showed that factory activity in South Africa began the year in contraction with the index slipping from 49.9 points in January from 50.7 points in the previous month. 

New passenger car sales also hit the skids last month, slumping by 10.8 percent to 29 040 unit sales from the 32 552 cars sold in January last year. 

Sacci said the index showed that merchandise import and export volumes and new vehicle sales had notable negative month-on-month effects on the BCI in January 2019. 

Dave Mohr and Izak Odendaal from Old Mutual Multi-Managers in a note said despite the stronger rand, the FTSE/JSE All Share Index returned 2.8 percent in January.

“Financials had a strong bounce, as can be expected with a stronger rand environment, and returned 5.9 percent in January. The sector was flat over 12 months,” the two said.

“Listed property had a much better month after 2018’s horrendous performance. The JSE All Property Index returned 8.4 percent in the month, but is still 10 percent in the red over 12 months.”


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