Data released on Tuesday revealed that South Africa’s company confidence declined in the fourth quarter, primarily as a result of the country’s poor car demand as consumer earnings continued to be squeezed by high borrowing prices.
According to a poll conducted by the Bureau for Economic Research and conducted by the Rand Merchant Bank (RMB), the business confidence index decreased from 33 points to 31 points in the preceding three months during the fourth quarter.
Dealers of new cars, who have been reporting extremely high inventory levels, had a 24 point decline in confidence, the lowest since South Africa implemented its tightest COVID-19 lockdown in the second quarter of 2020.
In the third-largest economy in Africa, rising borrowing costs have reduced consumer spending, and companies are finding it difficult to pass on increased input prices to customers.
Survey participants also mentioned logistical difficulties, such as dealing with potholes, delays at harbors, and difficulties getting paid on time for delivered items.
A 15-point increase in confidence among respondents in the retail sector—which has faced with high operating expenses due to power outages—was the bright light, though.
According to the study, non-durable retailers reported a sharp fall in volumes as a result of recent price hikes, even though the cost constraints had somewhat lessened.
But the RMB/BER Business Confidence Index fall also indicates underlying demand weakness, according to Isaah Mhlanga, RMB’s chief economist and head of research.