Business confidence dipped to a seven-month low in March, as the economic impact of the coronavirus pandemic on South Africa and its trading partners became evident – particularly towards the end of the month – according to data released on Wednesday by the SA Chamber of Commerce and Industry.
The index fell by 2.8 points in March to 89.9, its sharpest month-on-month decline since August 2019. This comes after an uptick of 0.5 index points in February.
According to SACCI, the “exceptional negative monthly impacts” on the country’s business confidence stemmed from a combination of lower number of new vehicle sales, the weaker exchange rate of the rand against the major trading currencies, and lower share prices.
The chamber said the decline did not yet fully reveal the extent of Covid-19’s impact on the economy and the business climate.
The March data reflects the effect of the “subdued performance of the domestic economy and to some measure the effect on international trade owing to the impact of the virus on trading partners.”
The economy is expected to come under more pressure in coming months, as various key industries begin to feel the effects of the 21-day lockdown, which began on March 26. During the lockdown only businesses deemed essential, such as food retailers and pharmacies, have been permitted to continue operating. The lockdown is expected to end on April 16.
The chamber added that apart from new vehicle sales and energy supply, the effect of the virus was not yet reflected in the available data for the real economy. It added that the recent downgrade of SA’s sovereign credit rating to junk status by Moody’s did not have a major effect on the March reading, as the rating action came at the tail end of the reporting month.
In late March the rating agency lowered SA’s credit rating to sub-investment grade, citing the deterioration in SA’s fiscal strength and “structurally very weak growth”. The two other major global ratings agencies, Fitch and Standard & Poor’s, had already downgraded South Africa to junk in 2017.
Compiled by Sibongile Khumalo