RMB’s Business Confidence Index weakens in first quarter

The latest survey on the RMB Business Confidence Index for the first quarter of 2021 has shown a decline from 40 index points to 35, indicating that close to seven out of ten senior executives expressed their dissatisfaction with prevailing business conditions. The period covered by the survey ranged from late January to the beginning of March, encompassing the easing of lockdown restrictions and the presentation of the national budget. Despite these developments, business sentiment failed to improve, pointing to ongoing challenges in the South African economy. Mpho Molopyane, RMB SA Economist, highlighted that the decline in business sentiment was driven by a fall in retailer sentiment, which dropped by 13 index points. This decline was tied to a weak consumer outlook, as the employment outlook in the country remains bleak. The COVID-19 pandemic has taken a toll on employment, with only a fraction of the jobs lost during the second quarter of 2020 being recovered in the subsequent quarters. As government support measures such as COVID grants are phased out, retailers continue to face challenges in stimulating demand and driving sales. Looking ahead, Molopyane expressed cautious optimism, suggesting that business confidence may stabilize at current levels. However, concerns remain about the potential impact of a third wave of COVID-19 infections, which could dampen sentiment in the second quarter of the year. The rollout of the vaccination program presents a positive development, but the timing of the third wave could pose challenges for economic recovery. While the manufacturing sector may benefit from the global economic recovery, uncertainties in the business environment persist. The budget presented in the first quarter offered some positive measures, including the lack of corporate tax increases and inflation relief for consumers. However, the ongoing struggles in job creation and the tapering of government grants continue to weigh on business sentiment. Despite efforts to support growth and investment, concerns linger about the timely implementation of key reforms and infrastructure projects. Overall, the RMB Business Confidence Index reflects a complex economic landscape in South Africa, with challenges and opportunities shaping the business environment.