“Ramaphoria” morphs into “Dystopia”


“Ramaphoria” morphs into “Dystopia”

The euphoria that accompanied the election of Cyril Ramaphosa as leader of the African National Congress (ANC) in December 2017 has morphed into a dystopia, as business executives wonder whether the ANC is capable of leaving its ideological baggage of Marxism /Leninism behind and instead embrace the Fourth Industrial Revolution.

Consumers in the first quarter 2018 sent the First National Bank (FNB)/ Bureau for Economic Research (BER) Consumer Confidence Index (CCI) to a record high, but business executives were more cautious.

The CCI surged by 34 points to a record +26 in the first quarter 2018. The largest jump in the CCI previously took place in the second quarter 2004, when the CCI soared by 27 index points from -7 to +20 after the announcement that South Africa would host the 2010 World Cup Soccer.


“The CCI has averaged +4 since 1994, but readings have been consistently below zero since the beginning of 2015. The fourth quarter of 2017 reading of -8 marked the longest uninterrupted negative streak (3 consecutive years) since the survey started in 1982. However, the jump to +26 index points in the first quarter of 2018 breaks this trend and indicates that most consumers are now optimistic about the outlook for the South African economy and their household finances,” FNB said at the time.

The surge in consumer confidence contrasted with the more subdued response of business executives, as although there was an exceptional 11 points rise in the first quarter 2018 to 45, the Rand Merchant Bank(RMB)  / BER Business Confidence Index (BCI) remained below the neutral 50 level.  Since 2008 the BCI has been above 50 on only four occasions.

This more cautious stance seems to have been vindicated as the ANC voted for land expropriation without compensation in 2018 and Ramaphosa recently said that the South African Reserve Bank (SARB) will be nationalised soon. In both cases he tried to reassure foreign investors that these policy initiatives would not harm foreign investors’ property rights, but foreigners have voted with their digital money.  According to the JSE, foreigners have sold a net R25.4 billion in the year to date, the largest outflow for this period this century.

The result of this was that the BCI sank to 28 in the first quarter 2019 from 31 in the fourth quarter 2018 and 45 in the first quarter 2018. This was the lowest level since the 27 index points recorded in the second quarter of 2017, and before that, the recession of 2009.

The BCI reflects the results of a survey of 1 700 business people. The bulk of the responses were received between 13 February and 4 March 2019. The headline index reflects the percentage of respondents rating prevailing business conditions as satisfactory. The first quarter reading of 28, therefore, means that more than seven out of ten business people were not satisfied with current conditions.

In terms of the five sectors covered by the survey, sentiment deteriorated in four of them. The nine-point declines in the building and retail trade sectors were the largest.

Building confidence dropped to 23 in the first quarter from 32 in the fourth quarter. This was the lowest level since the 2010 Soccer World Cup construction boom ended in 2011. The is largely due to a lack of new work as business executives worry whether land expropriation will affect other property rights.

This was reflected in Nedbank’s Capital Expenditure Project Listing which sank to a record low of 52 in 2018 from 92 in 2015.

Retail confidence sank back to 24 in the first quarter after recovering to 33 in the fourth quarter from 23 in the third quarter. The low confidence stems mainly from the persistent underperformance of the largest component, non-durable goods (mainly food and beverages).

This poor sales performance is reflected in the South African Chamber of Commerce and Industry (SACCI) Trade Activity Index (TAI), which sank to a record low of 30 in January 2019 from 47 in December 2018. The last time the TAI was above 50 was in January 2018, when it was 51.

Although wholesale confidence declined by a relatively modest four points to 40 in the first quarter from 44 in the fourth quarter, this concealed a large deterioration in sales. The seasonally adjusted real wholesale trade sales plunged by 7.3% in December 2018 compared with November 2018.

Manufacturing confidence slipped back to 25 in the first quarter after recovering to 30 in the fourth quarter from 26 in the third quarter. This drop was due to an abrupt fall in export sales in the first two months of 2019 when the rand was one of the strongest performing currencies in the world, on top of a faster deterioration in domestic sales.

Confidence in the new vehicle trade sector was the only sector that registered an improvement in confidence with a rise to a still low 26 from 15 in the fourth quarter after the SARB raised interest rates in November 2018. New car sales remained dismal with a 10.8% year-on-year (y/y) drop in new followed by a 13.3% y/y slump in February.

RMB said that several other external developments have also suppressed the business mood.

“Among these were the disruptive effects of load shedding in February, prolonged labour strikes in certain sectors of the economy, slowing growth in South Africa’s main trading partners (i.e. the EU, China and the rest of Africa), more revelations about the extent of state capture and corruption in South Africa, the continued conflicting pronouncements on policies and priorities due to the contestation within the ANC and the demands of the upcoming election, as well as the adverse impact of the “expropriation without compensation” discourse on many investors’ private property security perceptions,” the bank said.


This contribution to Finance Friday was made by

Helmo Preuss

Forecaster Ecosa cc

+27 79 773 2458



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