The Outlook for South Africa is Not Entirely Gloomy, and Here Are the Reasons Why

According to Ettienne le Roux, the senior economist at Rand Merchant Bank, the reality that business confidence has primarily remained constant despite some solid economic crosswinds indicates the existence of certain fundamental persistence and countervailing factors at work (RMB). 

According to Le Roux, the RMB/BER business confidence index (BCI) decreased to 38 in this fourth and final quarter of 2022, following a drop from 42 to 39 in the previous quarter. 

“Even though there wasn’t much of a shift in the BCI, the outcome conceals some startling dynamic behavior amongst some of the sectors, both positive and negative.” 

The findings of the index are based on a survey that was carried out between the 26th of October and the 14th of November 2022. The survey included responses from over 1,000 senior executives working in the building, production, retail, and wholesale sectors. Sixty percent of those polled continued to express dissatisfaction with the current state of the business environment. 

A turnaround in business confidence in the construction industry during the fourth quarter of this year more than compensated for the initial significant drops in business confidence seen in the wholesale and retail sectors since the pandemic. 

“After falling by 17 points to 29 in the third quarter, business confidence retrieved back to 46 in the fourth quarter, broadening what had been a turbulent (but rising) pattern over the past 2 years,” said Le Roux. 

The escalation of load-shedding during the fourth quarter had the potential to destroy business confidence. The fact that the BCI has, for the most part, maintained its previous value suggests the existence of certain underlying resilience as well as opposing forces at work.” 

The economist noted that the rebound in residential construction activity, as well as increasing business investment in green energy projects, industrial equipment, capital equipment, and other similar investments, expose greater fixed investment in at least some industries. 

In addition to this, and light of the continuing restoration of international tourism, it would appear that employment opportunities are growing once more in service-related industries such as hotels, hospitality, and, closely related to these fields, tour operators and travel agents. The demand for each of these items went up during the final quarter of the year. 

“However, there is no doubting the undeniable reality that the economy would be performing so much better if it weren’t for the slow pace that proceeds to describe the attempts that the government is putting forth in tackling growth-damaging supply shortages such as inadequate electricity, barely functioning ports, and a faltering rail system. 

According to Le Roux, “the significance of accelerating things cannot be overemphasized,” especially now that global headwinds, appear in dramatically slowing growth and declining export commodities prices. “The impact of fast-tracking things cannot be overemphasized,” The following is a rundown of the RMB BCI results for the period of time under consideration: 

Residential Upsurge 

The residential sector was the primary contributor to the most recent advancement in BCI; common seasonal factors were responsible for the activity regaining momentum. 

In comparison, there was a slowdown in the recovery of activity in non-residential areas. Profitability and confidence were hurt by interference from the building mafia, delays in awarding tenders, stiff competition to guarantee jobs, rapidly increasing building costs, and load-shedding. 

Wholesale and Retail Markets 

The RMB economist stated that not only did wholesale confidence drop from 50 to 37 in the fourth quarter, but it was also the first occasion since the third quarter of 2020 that confidence dropped underneath the impartial 50 mark. 

“Sales of consumer products took a tough knock as a result of lesser orders from retail outlets, while disruptions at the ports also contributed to a generally negative mood.” 

According to Le Roux, the level of confidence among retail merchants plummeted from 51 to 42. The decline in sales was widespread across all product categories. 

The decline became even more prominent when one takes into account the typical increase in business that occurs around Black Friday and during the holiday season. The increased cost of food and transportation, as well as the increased cost of servicing debt, hampered the purchasing power of households. 

In the final three months of the year, special components such as pent-up demand, expenditure on consumer durables, and going out to eat or for entertainment all failed to exert their normal impact. This was made worse by load shedding, which contributed further to the reduction in available business hours. 

Automotive Manufacturing 

According to Le Roux, even though new car sales had an improved performance in the fourth quarter, this was not enough to significantly boost the confidence of car dealers; their BCI climbed just one point to 41. 

“Prolonged waiting periods for stocks of particular models and makes and an evident negative view due to the increasing cost of debt seemed to dampen spirits,” the author writes. 


The most recent index indicates that manufacturing confidence has remained unchanged but at a dishearteningly low level of 26. Over the course of the study, there was a significant decline in the volume of export sales, which was paralleled by a decline in the volume of domestic sales; both of these trends were less robust than in the latter half of 2021. 

According to Le Roux, factors such as load-shedding, increasing fuel costs, and lengthy disruptions at the harbors were quoted as rationalizations for the poor performance of the company during the fourth quarter.

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