In the second quarter of this year, business confidence in South Africa fell to its lowest level ever recorded on the RMB/BER Business Confidence Index, which started in 1975.
The previous lows were registered during the third quarter of 1985 and the fourth quarter of 1977 due to political developments in South Africa.
About 1 800 executives surveyed across the building, manufacturing and the domestic trade sectors - including retail, wholesale and the motor trade - are very pessimistic about business conditions ahead as the South African continues to recover from the Covid-19 pandemic.
The SA economy was still in lockdown 4 during most of this period (April and May), with many businesses prohibited from operating or only able to operate on a limited scale due to only "essential" goods and services being allowed. On 1 June the country moved to the less restrictive lockdown level 3.
Business confidence declined in all 5 sectors covered by the index, namely retail, new motor sales, building activity, manufacturing and wholesale.
Of all the sectors, retail trade is the only sector where confidence did not fall below 10, mainly due to sales of essential goods, such as food and pharmaceuticals, and later winter clothing being allowed.
Simultaneously, most semi-durable (clothing) and durable goods (furniture and electronics) retailers are doubtful that sales volumes will benefit from pent-up demand being unleashed any time soon.
In contrast, sales of durables, such as furniture, appliances and electronics, came to a standstill.
Motor trade confidence fell from an already low 16 in the first quarter to just two index points in the second quarter. Building activity also ceased in the second quarter, with confidence dropping to two from an already depressed 15 in the first quarter.
Building and civil construction contractors mentioned that many clients cancelled future projects, while manufacturers cut their fixed investment back aggressively.
Manufacturing confidence dropped from 17 to six, so surpassing the previous record low of 14 seen both in 1998, and before that 1985. Wholesale confidence fell from 25 to four index points.
Long road to recovery
The BankservAfrica Economic Transaction Index (BETI), also released on Wednesday, tracked a monthly improvement in May 2020, suggesting the worst of the economic impact from the Covid-19 lockdown levels is over.
However, the overall impact over the three months to May points to a long road to recovery for the South African economy, according to Shergeran Naidoo, head of stakeholder engagement at BankservAfrica.
Annabel Bishop, chief economist of Investec, says the likelihood of a strong recovery in the third quarter of the year has diminished given the extreme nature of the lockdown measures and their lengthening.
The very slow reopening process has also quelled business confidence, but it is the collapse in probability in the second quarter, which has the most suppressing effect, in her view.