Business confidence at seven-year low

Zweli Mokagta

Zweli Mokagta

Business confidence in South Africa in the first quarter plunged to its lowest level in seven years.

Rand Merchant Bank (RMB) and the Bureau of Economic Research (BER) released the Business Confidence Index for the first quarter of the year, showing the first dip into negative territory since 2000.

The drop was a result of a slowdown in production volumes and an unpleasant trading environment. About 3000 businesses were surveyed in the first BCI report since the ANC's national conference in Limpopo last year.

The BCI tumbled by 19 points from 67 (out of 100) during the fourth quarter of last year to 48.

This was the biggest drop the index has experience since 1988 when it fell by 18 points.

Rudolf Gouws, chief economist at RMB, said: "While various factors affected business volumes, the most important are last year's interest rate hike, tightening of credit standards and electricity blackouts.

"If these developments were not enough, increased economic and political uncertainty also weighed on businesses' mood. The leadership change has increased uncertainty about the direction economic policies will take in future."

He added: "I think business confidence will remain in negative territory for the remainder of the year, unless interest rates fall, which seems very unlikely."