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RMB/BER-Business Confidence Index (BCI) Quarter 2, 2018
Date: 13 June 2018 Category: Economics |
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We take a look at the latest RMB/BER Business Confidence Index (BCI) numbers published for quarter 2, 2018. Instead of taking a look at the quarterly data we calculate the annual average business confidence level and track its year on year movements in order to determine which years business confidence grew in and in which years it dropped faster than the value of South African Rand.
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Is business confidence picking up in 2018?
The line chart below tracks the average annual business confidence from 1980. And sadly for South Africans with South Africa's checkered past there has been very few periods where business confidence shot the lights out. As a index level above 50 shows business confidence is above neutral. And a value below 50 shows business confidence is below neutral. Zero indicates businesses have no confidence in the business environment and a value of 100 shows businesses have extreme confidence in the economic environment it operates in.
And from the line graph above it is pretty clear that businesses in South Africa has not been very confident or optimistic about the South African economy for a very very long time. No wonder unemployment is hanging around at all time highs (see our South Africa's Unemployment page), or that one of our biggest industries, Manufacturing is down in the dumps and going nowhere slowly (see our Manufacturing page).
Gross fixed capital formation (or investments by businesses in semi and fixed assets such as machinery and equipment and new buildings and factories and plants) has all but dried up, by local and foreign businesses. But why would anyone invest here when business confidence is low, and government policy uncertainty such as land expropriation without compensation exists, lack of investor friendly policies such as restrictive labour laws and BEE requirements etc all hamper investment in the business sector.
South Africa's business confidence has been below neutral (basically negative) for the last 11 years. It shows highlights the rut South Africa's economy is stuck in. Slow to no economic growth, stagnating tax revenue collections due to no growth economy and high levels of unemployment.
It is going to take strong leadership and drastic policy changes to reverse the current trend in business confidence. Something has to change as doing the same thing and expecting a different result is the definition of insanity according to Einstein. Its time that the ruling party takes a good long hard look at some of their policies and start implementing pro business policies. Saying SA is pro business and open for business is one thing, proving it is a totally different story.
The hard slog for president Ramaphosa and his team starts now. And will have to continue for years to come if SA is to move forward and prosper and achieve economic growth required to reduce our persistently high levels of unemployment.
Gross fixed capital formation (or investments by businesses in semi and fixed assets such as machinery and equipment and new buildings and factories and plants) has all but dried up, by local and foreign businesses. But why would anyone invest here when business confidence is low, and government policy uncertainty such as land expropriation without compensation exists, lack of investor friendly policies such as restrictive labour laws and BEE requirements etc all hamper investment in the business sector.
South Africa's business confidence has been below neutral (basically negative) for the last 11 years. It shows highlights the rut South Africa's economy is stuck in. Slow to no economic growth, stagnating tax revenue collections due to no growth economy and high levels of unemployment.
It is going to take strong leadership and drastic policy changes to reverse the current trend in business confidence. Something has to change as doing the same thing and expecting a different result is the definition of insanity according to Einstein. Its time that the ruling party takes a good long hard look at some of their policies and start implementing pro business policies. Saying SA is pro business and open for business is one thing, proving it is a totally different story.
The hard slog for president Ramaphosa and his team starts now. And will have to continue for years to come if SA is to move forward and prosper and achieve economic growth required to reduce our persistently high levels of unemployment.