Surveyed between the 12th and 31st May, businesses faced better economic conditions as a whole, but variability between sectors was pronounced.

New vehicle dealers were particularly positive, their outlook bouyed by a 7.6% m/m lift in sales. Their confidence reading rose to 63 from 35, a near doubling.


Compared to last year, higher reported consumer incomes are expected to have boosted spend in May, with retailers' business confidence now at 54, from 37, also above the break-even mark and into positive territory, while wholesalers saw confidence remain relatively high, at 63. 

In the provinces, businesses in KwaZulu Natal and the Western Cape showed the highest level of confidence, with KwaZulu Natal seeing a phenomenal leap to 77 from 49 and the Western Cape moving  to 51 from 29. However, business confidence in Gauteng was still depressed at 40, showing only a 7 point lift and dragging down the performance of the overall index.  

The business climate overall is deemed to have improved, to 21 from -25, again doubtless on relief at the easing of lockdown measures in the second and third wave relative to the first. Improving household incomes have played a major part, as has the ability of hospitality and entertainment sectors to function. Consumer savings are being deployed and access to credit is improving for higher income earners.

The manufacturing industry, the last of the five sectors surveyed in the business confidence reading, is still in depressed territory, at 46, but materially less so than in Q1.21 when it saw a reading of 25. Manufacturing has benefited from increased local and foreign demand, with broad-based production lifts across virtually every sub-sector. However, raw material shortages were reported as key constraints, along with other supply chain bottlenecks and delays, similar to the international experience.This shows the imperative of resolving domestic supply chain requirements before embarking on an increase in localisation, as virtually all sub sectors across the manufacturing industry are already reporting shortages of key inputs to their processe

Load shedding is also a key constraint. Insufficient electricity supply to meet demand is likely to worsen in June. More broadly, increased economic activity puts additional strain on public utiities, including water. Absent a resolution to SA’s public infrastructure capacity, the move to localisation will only exacerbate the shortage of raw material inputs, with many areas already evidencing insufficient water supply for their needs. Additionally, water, electricity and other state-administered price increases would reduce the competitiveness of the domestic manufacturing industry, as would tariffs on key imports needed in South Africa’s supply chains.

The global shortage of semiconductors is negatively impacting the stock of new vehicle dealers and retailers of appliances, as sales of these durables and semi-durables continue to outshine those of non-durables (such as food) as consumers adapt to shifting patterns of work and entertainment at home.

Poor business conditions in the building sector have also been impacted by a collapse in demand for office space, while the residential sector continues to see more refurbishment and additions to homes.

Link : https://www.investec.com/en_za/focus/economy/sa-economics.html