South African Business Mood Slumps After Riots, Port Disruptions

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South African business confidence slumped in the third quarter as deadly riots, looting and arson disrupted supply chains and restricted economic activity. 

A quarterly business confidence index compiled by FirstRand Ltd.’s Rand Merchant Bank unit and Stellenbosch University’s Bureau for Economic Research dropped to 43 from 50 in the three months through June. The median of four economists estimates in a Bloomberg survey was 49.

Data for the index was gathered from Aug. 11-30, less than a month after the worst civil unrest since the end of white-minority rule erupted in the eastern KwaZulu-Natal province and the commercial hub of Gauteng -- the two biggest provinces by contribution to gross domestic product. Most of the 1,300 people covered in the survey were dissatisfied with prevailing business conditions, RMB said Wednesday in an emailed statement.  

Sentiment was also affected by the reintroduction of strict coronavirus restrictions, a cyberattack at the state-owned ports and rail operator that hobbled trade at key container terminals, and higher-than-usual levels of worker absenteeism due to Covid-19 infections and taxi violence that disrupted public transportation in the city of Cape Town, the lender said.

The third-quarter outcome would likely have been worse had it not been for the reintroduction of temporary welfare payments, a public-sector wage deal, and the announcement of long-awaited energy sector reforms, it said. 

While the index has now erased gains that saw it return to the highest level since the end of 2014 earlier this year, resilience in the gauges that track retail and wholesale confidence, as well as manufacturing sentiment, means “the adverse developments in the third quarter are likely to only deliver a temporary setback to what otherwise remains a cyclical economic recovery,” said Ettienne le Roux, RMB’s chief economist.

Data published Tuesday showed South Africa’s recovery from last year’s coronavirus-induced contraction quickened in the second quarter. The government can bolster this by building on reform momentum and delivering on growth-enhancing measures, he said. 

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