The RMB/BER Business Confidence Index (BCI) declined further from 38 points in the fourth quarter of 2022 to 36 in the first quarter of this year.

While the outcome could have been worse given the severity of power outages and the associated drop-off in business activity, the result is nonetheless disappointing, the companies point out, noting that the business mood remains “gloomy”.

The first-quarter survey was conducted between February 8 and 27. It covered 1 050 senior executives in the building, manufacturing, retail, wholesale and motor trade sectors.

Results among the different sectors that make up the RMB/BER BCI varied. Although confidence in manufacturing and consumer-facing retail fell considerably, sentiment changed little in the case of building, and improved somewhat, but to still weak levels, in wholesale and new-vehicle trade.

Manufacturing confidence fell by nine points to 17 in the first quarter. A level this low is rare, and it speaks to a sector that is bearing the brunt of the combined impact of intense loadshedding and dilapidated (and poorly run) logistic infrastructure, the companies posit.

They point out that the deterioration in sentiment occurred across various subsectors, all of which shared a common feature in falling domestic sales and production.

Fixed investment to expand existing production capacity also suffered as demand weakened and capital expenditure budgets were increasingly absorbed by alternative energy generation measures.

Retail confidence also fell from 42 to 34. Similarly, the deterioration in sentiment was broad-based as retailers too could not escape the impact of loadshedding, which reduced trading hours and increased operating costs owing to diesel generators having to run more often.

This, at the same time when still high consumer price inflation and slowing growth in compensation continue to place pressure on household disposable income, the companies outline.

Sales volumes worsened further across retailers of durable goods (such as furniture and electronics) and non-durable goods (food and beverages, for example), while retailers of semi-durables (mainly clothing) saw a slight improvement in sales during the first quarter.

Confidence of building contractors, the group which is captured in the RMB/BER BCI, declined marginally from 46 to 43. Although still in net negative terrain, at 43, building confidence is well away from the extremely low levels witnessed during much of 2020 and 2021.

Notably, if subcontractors – particularly electricians – are considered, confidence and activity in the overall building sector rose massively owing to the installation of backup power. At least for some, loadshedding seems to have a silver lining, the companies highlight.

Wholesaler confidence edged up from 37 to 40. In the same quarter, new-vehicle dealer confidence rose from 41 to 44.

These are minor increases, the companies note, adding that both outcomes also remain below 50, which means most respondents in these sectors are unhappy with prevailing business conditions.

In the first quarter, pervasive power outages, coupled with deteriorating household income knocked manufacturing and retailer confidence hard. By contrast, sentiment among wholesalers and new-vehicle dealers improved a little.

The standout, however, was noted to be the BCI of contractors and subcontractors combined, which surged to 49 in the first quarter.

Even though this improvement does not reflect in the headline RMB/BER BCI result, the upsurge in the installation of renewable energy and other loadshedding mitigation measures is highlighted to be a boon for the broadly defined building and civil construction sector.

“That said, a thin silver lining attached to loadshedding must not distract from the devastating blow loadshedding specifically, and failing rail, road, and port infrastructure more generally, are inflicting on the economy. The urgent need of a united public and private sector effort to fix disruptive supply-side bottlenecks cannot be stressed enough,” emphasises RMB chief economist Ettienne le Roux.