Business confidence appears to be rising despite the challenges of the discharge and high interest rates. The other service sector, which includes the hospitality and transportation sectors, performed better than other sectors in the fourth quarter, but also off a low base in 2021. The Business Confidence Index (BCI) from the South African Chamber of Commerce and Industry (SACCI) for November recorded a reading of 110.9 and although the BCI dropped 1.4 index points to 109.4 in October, it again recovered 1.4 points of the index in November 2022. The BCI was 3.6 points higher in November 2022 than in November…
Business confidence appears to be rising despite the challenges of the discharge and high interest rates.
The other services sector, which includes the hospitality and transportation sectors, performed better than other sectors in the fourth quarter, but also off a low base in 2021.
The South African Chamber of Commerce and Industry (SACCI) Business Confidence Index (BCI) for November recorded a reading of 110.9 and although the BCI index fell 1.4 points to at 109.4 in October, it regained 1.4 index points in November 2022.
The BCI was 3.6 points higher in November 2022 than in November 2021 and 2.9 points higher than in November 2020. The SACCI BCI average of 109.0 in the first eleven months of 2022 was slightly higher than the 108.7 of the corresponding period in 2022. 2021, which indicates a relatively stable situation.
According to SACCI, the unexpected performance of business confidence during 2022 was affected by a combination of global and local economic developments, but the current level of the SACCI BCI indicates that the disruptive effects experienced during and after Covid in 2020 and 2021 have been largely overcome. . .
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Covid replaced by other events
However, the aftermath of Covid was replaced by global and domestic events that brought more disruption in 2022 as well as risks to the business fraternity. The erratic movement of the SACCI BCI in 2022 from a high of 112.0 in February to a low of 103.2 in May, a difference of 8.8 index points, itself reflects the risk and uncertainty surrounding the business climate in South Africa through 2022, says SACCI. .
Eight of the fourteen sub-indices monitored had a positive or neutral impact on the BCI between October and November. Rising new vehicle sales, share prices on the JSE and manufacturing output had the biggest short-term (month-on-month) positive impact on the BCI in November.
In the medium term, increased inbound tourism, increased new vehicle sales and increased merchandise import volumes had a notable positive effect on the BCI.
The index shows that import and export volumes saw increased activity in the first nine months of 2022, rising significantly by 15.9% y/y and 9.6% y/y respectively, with foreign trade activity playing an important role in supporting business confidence.
South Africa’s real GDP grew by 2.3% year-on-year in the first three quarters of 2022, while the tertiary sector increased by 4.1%, the secondary sector decreased by 0.9% and the primary sector 6.1%. SACCI says economic performance appears to have contributed to the relative stability of business confidence and investor confidence should benefit from the latest economic performance.
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Confidence in the other service sector
Confidence in the other service sector, as measured by Stellenbosch University’s Bureau of Economic Research (BER), rose from 53 in the third quarter to 68 in the fourth quarter, suggesting that, while slightly more than half of the respondents were satisfied with the current trading conditions. In the third quarter, more than two-thirds are now.
The other services sector consists of hotels, restaurants, transportation, real estate and business services and is called “other” services to distinguish them from the retail, wholesale and automotive sectors, which are also part of the sector services, but are included. in the Business Confidence Index (BCI) RMB/BER.
The other service sector is not included in the ICC due to its backward economic cycle characteristics, which means that it recovers or deteriorates later than the ICC sectors. Although the other service sector contributes a considerable 22% (2019) to GDP and employment, the BER does not include it in the BCI to safeguard its advanced signaling properties.
According to BER, the level of confidence in other services exceeds all other sectors covered by the Business Confidence Index (BCI) RMB / BER.
“Most notably, domestic trade confidence fell back to 40 in the fourth quarter, after rising to 47 in the third quarter. The divergence in confidence between domestic trade and the other service sector is notable and may be a sign that consumers, especially at the high income end, are shifting their spending from goods to services, such as dining out, accommodation, travel and property . . . rent.”
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Domestic tourism is looking up
The domestic tourism industry will likely experience its first “normal” summer holiday season after the lockdown in the fourth quarter.
Covid-19 restrictions imposed at the height of the pandemic reduced the number of foreign visitors in the past three years, while the other services sector also faced several other shocks, including political unrest in July 2021 and the floods in KwaZulu-Natal in April 2022, which particularly damaged the hospitality and transport sub-sectors of the other service sector.
The BER says that given this low base, it is therefore not surprising to see that the increase in overall confidence this quarter was mainly driven by the transport and hospitality sub-sectors, with strong growth in confidence in the transport sector from 27 to 94 in the fourth quarter. . , the highest level of confidence since 2006.
Hoteliers and restaurateurs were also more confident, with their confidence rising by an impressive 20 points to 73 in the fourth quarter, again the highest level of confidence since 2016. The BER says this increase in confidence was accompanied by firmer activity.
Activity in the hospitality industry increased at a faster pace in the fourth quarter as more people ate out and stayed in. After falling from 57 to 48 in the third quarter, hospitality activity rebounded to 56 in the fourth quarter, which is noteworthy for a sector so vulnerable to power outages during peak hours.
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However, the increases come from a low base
However, the BER says, this result should be seen against the low base set in the last quarter of 2021 when travel bans restricted travelers from the country’s main tourist destinations to Europe and the US , while hotels and restaurants were forced to provide services to domestic countries. residents with reduced rates to compensate for the loss of customers.
Activity in the transport sector advanced further in the fourth quarter, mainly due to the faster recovery of road freight following the devastating floods in KwaZulu-Natal in April and the deterioration of rail transport in goods
Property sector behavior remained quieter than at the start of 2022 as the combination of rising interest rates and the clearing of the backlog of households wanting to move after lockdown further dampened the subcomponent of sale and auction of the property. .sector.
