The SA Daily
12 August 2020
Confidence as low as ever
Shireen Darmalingam
- The South African Chamber of Commerce and Industry’s (SACCI) business confidence index for May, June and July is due out today; the Chamber had suspended publication due to the lockdown and lack of economic activity.
- In April already, the SACCI business confidence index had reached a 35-year low of 77.8 pts, after 89.9 pts in March. April is the lowest since the inception of the index in 1985. The Chamber at that time urged government to accelerate the phased-in re-opening of the economy, citing further downside to business confidence and economic growth. The index was already constrained by weak economic growth at that time, since exacerbated by the pandemic lockdown as of 27 March. Though lockdown restrictions were eased from 1 May and then further in June, there is still an ongoing impact on confidence.
- The lockdown has also exacerbated pre-existing challenges such as SA’s constrained fiscus and downgrade to non-investment grade status by Moody’s, Fitch and S&P. In addition, the worsening inequality and poverty amid the pandemic will keep business and consumer confidence subdued.
- The rand exchange rate too has weakened, by 20.1% since January. The rand may strengthen into year-end – but the uncertain trajectory of the pandemic has an impact on the rand and therefore confidence. Investors expect the SA government to manage the pervasive health and economic crisis with reforms to prevent a further slide into troubled territory.
- We forecast GDP growth to contract by a profound 8.5% this year, from already weak growth of 0.2% in 2019.
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