The SA Daily
16 April 2019
No confidence, no growth
- Based on the production side of the SA economy, we estimate that real GDP growth contracted 1% q/q (seasonally adjusted and annualised) in Q1:19. Growth might average just 0.9% in 2019, with the risks persistently to the downside and stemming mostly from uncertain electricity supply and depressed business confidence.
- Business confidence has been decimated by severe power cuts and the ongoing corruption revelations at the various commissions of inquiry, which has clearly undermined the positive impact of President Ramaphosa’s economic reforms thus far since he became president of the ANC and also president of SA after the ANC conference in December 2017.
- The Business Confidence Index (BCI), at a mere 28 pts now, shows that confidence is deeply depressed, which won’t encourage real fixed investment growth. Confidence is down too across all surveyed sectors such as building contractors; manufacturing; retail; wholesale and new vehicle dealers. This hardly promises of economic growth and jobs for the youth.
- The Q1:19 BCI matches the 2008/09 crisis, with only 28% of respondents still rating business conditions as satisfactory. Sound business confidence is just one of the many measures needed for economic growth, employment, and thus transformation. The SARB estimates that “every 1 per cent increase in the BCI leads to a 0.5 per cent increase in investment”. Therefore, attracting sufficient FDI would be impossible if even SA businesses view conditions here as unfavourable.
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