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SA business mood has worst start to year since 1993

Sentiment was clouded by downward revisions to 2020 economic growth forecasts.
South African business confidence had the worst start to a year since 1993, increasing pressure on President Cyril Ramaphosa to detail decisive reforms in his state-of-the-nation address next week to rescue an economy that’s been stuck in a downward cycle for more than 70 months.

An index measuring sentiment declined to 92.2 in January from 93.1 in December, the South African Chamber Commerce and Industry said in a statement Thursday. That’s the weakest January number since 1993, when political uncertainty and violence surged during negotiations that preceded the country’s first democratic elections. The median estimate of four economists in a Bloomberg survey was for 93.2.

Sentiment surged in 2018 after Ramaphosa won the leadership of the ANC and took over as president of the country, but has since slumped as reforms stalled with the annual average reaching a 34-year low in 2019. Now, decisive developments in Ramaphosa’s fourth state-of-the-nation address next week and Finance Minister Tito Mboweni’s budget speech on February 26 “could determine the economic performance and business climate for the longer term,” Sacci said.

Sentiment was clouded by downward revisions to 2020 economic growth forecasts to less than 1% by key institutions, including the International Monetary Fund, after the economy unexpectedly contracted in the third quarter and regular power cuts resumed. Gross domestic product hasn’t expanded at more than 2% annually since 2013 and neither the central bank nor the National Treasury see it reaching that level by 2022. The loss-making state-power company Eskom said rolling blackouts would continue for at least 18 months, a further drag on confidence.

South Africa had “difficulty” garnering attention as an investment destination at the World Economic Forum in Davos last month, Sacci said. The government sent a smaller delegation than usual and Ramaphosa didn’t attend so he could deal with domestic issues.

“It appears that the gap between South Africa and the developed world is broadening,” the business chamber said. “To be open for business implies an economic policy environment that is in support of generating returns that attract fixed investment.”

Sacci said policy uncertainty related to land reform, a lack of government capacity to meet increasing social demands and pressure on the state finances made it difficult to sell South Africa to international markets.

© 2020 Bloomberg L.P.
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COMMENTS   4

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This comes to mind.

“Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died”.

Leonard Cohen.

Ag come now rainbow nation, why so depressed..

Look at the pearls of BEE, EWC, Eskom, SAA, SABC, Denel, lotto board, SETA’s, minimum wage, visa restrictions, lower pass rate for schools and varsities to name a few. What can be wrong or go wrong? 1% GDP growth is perfect, as long as the right citizens (political elite and their friends and families) are driving it. Pat yourselves on the back – what a result for the revolution!

Don’t worry EWC will fix this.

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