Business confidence slips in the fourth quarter

South Africa's business confidence has taken another hit in the fourth quarter, with the RMB/BER confidence index slipping further into negative territory. Around 60% of business executives surveyed expressed dissatisfaction with the current business conditions in the country, citing factors such as load shedding, port and rail constraints, and high interest rates as major challenges impacting economic activity. Siobhan Redford, an economist at Rand Merchant Bank in South Africa, shed light on the current economic landscape during a recent interview on CNBC Africa. Redford highlighted the broad-based impact of load shedding on various sectors of the economy, emphasizing the strain on manufacturing and retail industries. Many businesses have had to resort to generators, driving up costs due to the high prices of diesel. Retailers, in particular, have faced challenges with reduced trading hours and increased expenses related to power generation. The energy crisis has exacerbated an already difficult situation, with companies also grappling with logistical challenges at ports and on rail networks. In addition to load shedding and logistical issues, the South African economy is facing pressure from rising interest rates, which are dampening consumer demand both domestically and globally. The high cost of capital is a concern for businesses seeking loans or looking to invest in the economy. Despite recent fluctuations in inflation rates, Redford maintained that the inflation outlook remains elevated, with expectations for a gradual decline in the second and third quarters of the following year. Looking ahead to 2023, Redford offered a cautious outlook, forecasting subdued economic activity due to structural constraints and a global economic slowdown. However, she also highlighted some positive developments, such as increased investment in embedded generation and progress in the independent power producer program. These initiatives are expected to improve electricity supply and stimulate investment in the economy, albeit with a time lag before their full impact is realized. While challenges persist in the South African business landscape, there are signs of resilience and proactive measures being taken to address critical issues. Redford's analysis offers valuable insights into the complexities facing businesses in the country and the potential pathways for recovery and growth in the coming year.