Local business confidence down

2008-04-28 00:00

Business confidence levels in Pietermaritzburg and the uMgungundlovu region have slumped sharply in the first quarter of 2008 compared with levels recorded in 2007, on the back of negative business sentiment fuelled by waning consumer demand, higher interest rates and the electricity crisis.

The present Business Confidence Index (BCI) sits at 66 on a scale of 0 to 100, down sharply from 83 in 2007. A level of 50 usually indicates neutrality.

The BCI stood at 83 in 2005 and 79 in 2004.

A troubling percentage of local businesses surveyed described business and trading conditions as poor or very poor. This figure now sits at 23,4%, up from only five percent in 2007.

In addition, 31,9% of companies expect their sales performance to deteriorate in 2008, compared with only six percent in the previous survey.

According to economist at the University of KwaZulu-Natal, Clive Coetzee, there has also been a significant drop in the percentage of companies that plan to expand their workforce in 2008.

In addition, about 10,6% of the respondents plan to downsize their workforce.

The survey clearly confirms that companies are still grappling with the implications of the electricity crisis, which intensified during early 2008.

Matters pertaining to electricity, infrastructure, water and roads grew significantly in importance.

About 87,2% of respondents ranked this area as critically important — up a whopping 17,2% from 2007.

In hindsight, it is entirely understandable that the outlook of companies would have deteriorated in 2008, particularly given the fact that the city is driven by consumers in large part.

Consumers have been battered by double-digit inflation, rising interest rates, the aftermath of the National Credit Act and other factors in recent months.

Although currently sitting at a low level, the region’s BCI is still much higher than the national business confidence indicator, which sits at 48.

In keeping with the expectation that interest rates have impacted on businesses, more businesses view the cost of money as critically important.

The state of the national economy has also increased in importance.

Furthermore, foreign competition has also become more important to local companies.

Interestingly, crime has decreased fairly noticeably in importance, although 68% of companies still rate crime as "fairly important" to "very important".


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