South Africa’s business confidence jumps to pre-pandemic levels despite record unemployment

Business confidence in South Africa skyrocketed to pre-pandemic levels according to a quarterly business confidence index published on Wednesday by Rand Merchant Bank (RMB) unit and Stellenbosch University’s Bureau for Economic Research.

The index jumped to 50 in the second quarter, up from 35 in the preceding three months, the highest level since the end of 2014.

Analysts behind the compilation of the survey cited sharp rebounds in sentiment in manufacturing, retail and the transport sector as driving the growth.

Meanwhile, a monthly index by the South African Chamber of Commerce and Industry (SACCI) rose to 97 in May from 94.7 in the previous month, the highest level since March 2018, a month after Cyril Ramaphosa took over the presidency pledging to revive the economy and fight corruption. The SACCI attributes the rise to a resurgence in exports, a stronger rand and higher international commodity prices that bode well for the current account and government finances.

There are fears that a looming third wave of COVID-19 infections could prompt the reimposition of strict lockdown measures that may affect the business environment. But SACCI says the export-led recovery should give policy makers room to address structural deficiencies.

It has previously urged the government to prioritize economic growth enhancing reforms to enlarge its tax base and encourage the creation of jobs in the private sector that would reduce the reliance on social welfare and ease the strain on public finances.

Despite an improved business environment, South Africa is still facing economic challenges. The jobless rate in the first quarter rose to a record 32.6%, while unemployment is at 43.2%.

“In the end, for the current cyclical economic recovery to develop into a durable business-cycle upswing, jobs must be created, and for that to happen, fixed investment must accelerate,” said Ettienne le Roux, RMB’s chief economist.

“To this end, it would help if the government fast-tracks its infrastructure drive, while simultaneously, and speedily, implements overdue business-friendly reforms.”

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