South Africa Business Confidence Drops as Recovery Still Fragile

South African business confidence unexpectedly fell in the first quarter as company executives remain concerned about the fragile nature of the economy’s recovery.

A quarterly gauge measuring the business mood dropped to 35 from 40 in the previous three months, FirstRand Ltd.’s Rand Merchant Bank unit said Wednesday in a statement. While that’s still higher than 2-1/2 years ago, it means close to seven out of 10 senior executives are not satisfied with current business conditions.

South Africa Business Confidence Drops as Recovery Still Fragile

The median of four economists’ estimates in a Bloomberg survey was for the index that is compiled by Stellenbosch University’s Bureau for Economic Research to climb to 42.

The survey was done in the latter half of February when the peak of the country’s second wave of Covid-19 infections had passed, some lockdown restrictions, including the complete ban on alcohol sales, had been lifted and power cuts were less pronounced. The fact that the index still fell therefore shows that respondents remain worried about subdued activity in sectors such as manufacturing and construction, RMB said.

Confidence fell across all the five sectors that make up the index.

Data released on Tuesday showed South Africa’s economy grew more than expected on a quarter-on-quarter annualized basis in the three months through December and the 7% contraction for the whole of 2020 was less than the Treasury’s forecast of a 7.2% drop.

SOUTH AFRICA REACT: 4Q Growth Slows With Worse to Come

However, the recovery remains vulnerable and could easily be derailed by a sharp unexpected increase in U.S. inflation that triggers tighter global financial conditions, a significant third wave of Covid-19 infections that leads to some lockdown restrictions being reinstated and power outages intensifying again, RMB said.

Read more: South Africa’s Eskom to Cut 2,000MW From Grid From 5pm

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