Business confidence jumps to 44 as economy regains momentum

Following two consecutive quarters of declines, the Business Confidence Index (BCI) by RMB and the Bureau for Economic Research (BER) rose by five points to 44 in the fourth quarter.

This places confidence three points above its long-term average, meaning almost half of the businesses surveyed are satisfied with prevailing conditions.

The rebound appears to be broad-based, as confidence improved in five of the six sectors surveyed. Only building contractors registered weaker sentiment.

RMB suggests that, taken together, the results indicate the economy is regaining some momentum after remaining subdued in the middle of the year.

This aligns with the modest improvement in activity seen in the GDP data released by Stats SA on Tuesday, which marked the fourth consecutive quarter of economic expansion.

The economy expanded by half a percent in Q3, compared with the 0.9% seen in the three months through June.

Key Drivers of Confidence
Isaah Mhlanga, Chief Economist at RMB, attributes the lift in confidence to severalfactors:

The recent removal of South Africa from the FATF grey list.

The S&P credit ratings upgrade.

Relatively stable politics.

A well-received Medium-Term Budget Policy Statement last month.

Mhlanga also noted the positive impact of monetary policy and currency stability: “The rand was fairly strong and, importantly, stable. The South African Reserve Bank (SARB) cut its policy interest rate by 25bps to 6.75\% towards the end of the survey period, which is positive for the more interest-rate-sensitive sectors of the economy.”

While the latest business confidence is encouraging, Mhlanga stresses that it is too early to celebrate, adding that the improvement needs to be sustained for at least a couple of quarters.