A survey by the Rand Merchant Bank (RMB) has revealed a dip in confidence of doing business in South Africa in quarter 4 (October to December).
The report showed that the conviction in South Africa’s business climate was mainly due to weak local demand for vehicles.
Further, the survey noted that the local demand for vehicles had significantly dipped in the south African country due to pressure on consumer incomes despite high borrowing costs.
The report was in significant contrast to the Q3 report by RMB, which revealed that South Africa’s business confidence was gaining ground.
“After falling to 27 in the second quarter of 2023, the RMB/BER Business Confidence Index (BCI) regained some ground to register a level of 33 in the third quarter,” the Q3 report read, in part.
However, despite the Q3 report, the respondents who partook in the business confidence survey still shared similar sentiments in terms of dissatisfaction with the prevailing South Africa’s business conditions.
Trend in Business Confidence in South Africa
Therefore, the drop confidence of the business climate in the country in the Q4 report is not new to many.
Nevertheless, South Africa’s rank dropped 31 points in the fourth quarter, from 33 points in the previous three months.
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Further, confidence among new vehicle dealers, dropped by 24 points making it the lowest since the second quarter of 2020, when the country suffered the COVID-19 lockdown.
This is despite the car dealers registering very high inventory levels. Notably, the car dealers in the latest report similarly shared negative sentiments to the Q3 report.
Other reasons cited were the rising borrowing costs which have reduced consumer spending, while businesses struggle to pass on higher input costs to buyers.
Notably, strains by the South African consumer were similarly noted in the Q3 survey where RMB revealed that high interest rates and the resultant strain on consumers greatly affected the business climate in South Africa.
South Africa’s state of economy
In October, South Africa’s inflation rate accelerated to 5.4 percent from the previous 4.8 percent, as previously forecasted.
Further, according to Statistics South Africa, the consumer price index (CPI), which reflects the changes in prices of a representative basket of goods and services that households buy, increased by 5.4 percent in September 2023 compared with September 2022.
Notably, this was a significantly higher than the annual rates recorded in August (4.8%) and July (4.7%).
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A key economic indicator, fuel, had a big impact on the monthly rate.
“The transport index was responsible for two-thirds of the 0,6% rise in the cost of living between August 2023 and September 2023, mainly pushed higher by rising fuel prices,” a report by Statistics South Africa for October 2023 noted.
