markets

South Africa Business Confidence Slumps for Fourth Month in May

  • Drop is longest streak of declines since 2011, data show
  • Index is at 94, lowest reading since October, chamber says

South African business confidence had the longest streak of declines since 2011 as industries await real reforms under the tenure of new president Cyril Ramaphosa.

The index dropped to 94 in May from 96 the previous month, the South African Chamber of Commerce and Industry said in an emailed statement Wednesday. That’s the lowest since October.

Business confidence has slipped each month since reaching a more than two-year high in January. Ramaphosa’s ascent to power initially boosted sentiment and the rand following Zuma’s scandal-ridden tenure of almost nine years. Africa’s most-industrialized economy hasn’t grown at more than 2 percent a year since 2013 and is struggling to gain momentum despite political changes that bolstered investor confidence.

The economy shrank the most in almost a decade in the first quarter as Zuma handed the reins of power to Ramaphosa, racking up the worst performance of the former president’s tenure. The country’s biggest state companies and many municipalities have been plagued by mismanagement, cash shortages and corruption scandals for years, leaving them in financial strain and posing an acute risk to the nation’s finances.

“This deficiency of proper service delivery by local government is affecting businesses operating in municipalities and in service-delivery areas, curtailing their ability to expand and create employment,” the chamber said.

Irregular spending by South Africa’s municipalities surged 75 percent to a record 28.4 billion rand ($2.2 billion) in the 2017 fiscal year as accountability “continues to fail in local government,” the Auditor-General said May 23.

“Once the challenge of good governance has been achieved, attention will focus on structural economic issues, placing South Africa on the road to sustainable economic recovery,” the chamber said. “Once investment and employment creation are reinstated, business confidence should shed short-term variations and enhance economic growth and participation.”

Five of the 13 sub-indexes that make up the gauge declined from month earlier, the chamber said. The main negative impact came from lower merchandise import and export volumes, it said.

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