S. Africa Business Confidence Slumps as Strikes IntensifyRene Vollgraaff
South African business confidence declined as accelerating inflation, a weakening currency and labor strikes hurt sentiment in Africa’s largest economy, two separate reports show.
The South African Chamber of Commerce and Industry’s business confidence index remained close to the lowest level in a decade, dropping to 90.5 in August from 90.7 a month earlier, the business group said in an e-mailed statement today. The RMB/BER business confidence index fell 6 points to 42 in the third quarter, which indicates that almost three fifths of respondents aren’t satisfied with prevailing business conditions, RMB said in an e-mailed statement.
“The continuing lack of economic momentum, on-going labor disruptions of the economy and the slowdown in growth in the Brics countries are important factors affecting business confidence,” the Johannesburg-based chamber said. “It is important that supportive conditions for economic growth and disruptions by militant labor conduct are addressed urgently.”
Workers in carmaking and construction industries are on strike and as many as 90,000 gold-mining workers may down tools later today to demand higher wages. Mining strikes shaved about 0.5 percentage point off economic growth last year, according to the government. The rand has lost 18 percent against the dollar in 2013, the most of 16 major currencies tracked by Bloomberg.
“Sluggish, and volatile, economic growth is probably the best we can hope for in the period ahead,” RMB, a unit of Johannesburg-based FirstRand Ltd., said. “Deteriorating confidence coupled with widespread strike action point to growth in all likelihood having fallen back to levels of around 2.5 percent in the second half of the year.”
While gross domestic product growth accelerated to an annualized 3 percent in the second quarter from 0.9 percent in the previous three months, it missed the median estimate of economists in a Bloomberg survey. The Reserve Bank is forecasting growth of 2 percent this year, which would be the slowest since a recession in 2009. Inflation at 6.3 percent in July exceeded the central bank’s 3 percent to 6 percent target range for the first time in 15 months.
The Bureau for Economic Research compiles the quarterly confidence indicator on behalf of Rand Merchant Bank from surveys of businesses.