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SA business confidence rebounds in Q3 driven by strong agriculture performance
The RMB Business Confidence Index rebounded to 24 points in the third quarter. This is after falling from an all-time low of five in the second quarter. Of the five sectors making up the Index, the rebound in wholesale confidence was the largest. And this was due to a strong agricultural sector and international trade picking up. Ettienne Le Roux, Chief Economist at Rand Merchant Bank joins CNBC Africa for more.
Wed, 09 Sep 2020 15:21:20 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Rebound in business confidence in the third quarter following relaxation of restrictions from global lockdown
- Investment intentions remain low with businesses focused on survival amid uncertainty
- Positive growth in the agricultural sector, driven by strong export performance and multiplier effects on other sectors
Business confidence in South Africa rebounded in the third quarter, with the RMB Business Confidence Index climbing to 24 points after hitting an all-time low of five in the second quarter. The improvement in confidence was driven by the relaxation of restrictions from the global lockdown, leading to an uptick in economic activity across various sectors. While the increase is a positive sign, it is essential to note that the index level of 24 is still significantly lower than pre-pandemic levels in 2019, indicating ongoing challenges in the business environment.
Ettienne Le Roux, Chief Economist at Rand Merchant Bank, highlighted that while the overall sentiment has improved, investment intentions remain subdued, particularly in the manufacturing sector. Many businesses are focused on survival and are hesitant to commit to significant investments amidst uncertainty. Le Roux emphasized the importance of high levels of fixed investment in driving economic growth in the long term, pointing out that the current environment may not be conducive for substantial capital expenditures.
However, there is a glimmer of hope in the agricultural sector, which has shown positive growth despite the challenging economic climate. The sector has benefited from strong export performance, particularly in maize and citrus, leading to increased volume growth. The robust agricultural output has also had ripple effects on other sectors such as wholesale, manufacturing, and retail, indicating a positive outlook for the broader economy.
Le Roux suggested that to further support the recovery and growth of the agricultural sector, the government could focus on streamlining export processes and improving logistics to facilitate smoother trade. By reducing bottlenecks at ports and enhancing transportation infrastructure, the government can create a more conducive environment for farmers to expand their reach in international markets.
While the rebound in business confidence is a positive development, the road to full economic recovery remains uncertain. The lingering effects of the pandemic continue to pose challenges for businesses across various sectors. As South Africa navigates through these uncertainties, leveraging the resilience of sectors like agriculture could play a crucial role in driving sustainable growth and rebuilding the economy.
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