South African business confidence slumped to the lowest level since disinvestment from the country over its apartheid policies started gaining momentum more than three decades ago.
A sentiment index compiled by the South African Chamber of Commerce and Industry declined to 89.1 last month from 92 in July, according to an emailed statement Wednesday. That’s the lowest level since April 1985, the year the United Nations Security Council called on members to introduce more far-reaching economic measures against South Africa.
While Africa’s most-industrialised economy dodged a second recession in as many years, it’s stuck in the longest downward cycle since 1945, according to central bank data. Weak economic growth, rising debt and an unemployment rate at 29% continue to vex the country, provoking social tensions and prompting warnings from business groups and analysts that it may be forced to seek assistance from the International Monetary Fund.
South Africa experienced a wave of xenophobic attacks over the past three weeks, which have seen scores of foreign-owned shops looted and burned. While Police Minister Bheki Cele said the primary motive behind the violence is crime, some groups say the actions are partly due to the frustration of people who continue to live in poverty.
“The current state of fiscal deficiencies, social injustices and unemployment necessitates an urgent adjustment in how their impact is viewed, no longer as just economic terms that must be studied and converted into action, but as the likely cause of crime violence, looting and anti-foreigner sentiments that are currently dominating news headlines,” the business chamber said. “It is denting the status of South Africa as a favoured investment destination and affecting lives and businesses of ordinary South Africans.”
‘Giving up hope’
A quarterly business confidence index compiled by FirstRand’s Rand Merchant Bank unit and Stellenbosch University’s Bureau for Economic Research dropped to a two-decade low of 21 in the three months through September, from 28 the previous quarter. That means eight out of every 10 respondents are dissatisfied with prevailing business conditions.
“It would appear if more and more business people participating in the BER’s survey are simply giving up hope, a concerning development, and one that spells even greater trouble ahead for an already weak economy,” RMB said in an emailed statement.
Business sentiment surged to a two-year high in early 2018 after Cyril Ramaphosa won the leadership of the ruling African National Congress and took over as president of the country, but has since waned as businesses continue to seek real reforms.
Policy uncertainty and legislation that forces bank to write off certain debts, along with plans to introduce prescribed assets for pension funds and a national health insurance system, and unresolved issues around land reform added to the adverse business climate in August, Sacci said.
“To further delay growth-boosting reforms that should have been implemented years ago, such as easing of immigration regulations, cutting red tape, auctioning spectrum and simplifying visa regulations, will simply perpetuate this vicious cycle South Africa is currently in,” said RMB chief economist Ettienne le Roux. “Time is not on our side, especially now that the global headwinds the country is facing are becoming ever-fiercer.”
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