Crisis in business confidence to continue until market-friendly reforms are implemented
13 September 2019
Sakeliga is greatly concerned about the recent drop in business confidence, as measured on the RMB/BER Business Confidence Index (BCI). The RMB/BER BCI index dropped to the lowest level in 20 years in the third quarter of 2019. The index is currently at lower levels than the levels seen seen during the Great Financial Crisis of the late 2000s.
Gerhard van Onselen, senior analyst at Sakeliga, says, “We find the acute drop in business confidence in the third quarter of 2019 to 21 points highly troubling, but not entirely surprising. The reality is that a great many people in the business sector are experiencing heightened uncertainty and perceive mounting political risk, while having to deal with substantial regulatory interventionism and compliance burdens.”
Sakeliga’s recent in-house poll of members and subscribers in August of 2019 shows 84% of respondents perceiving worse political risk than 3 years before. Factors such weak economic prospects, concern over government policies (such as BEE) and political instability and uncertainty in general, emerged as some of the major themes of risk for the respondents polled.
“Excessive economic interference and costly compliance burdens are clearly weighing down on business confidence. While not yet pointing to a wholesale exit, our poll shows many businesses diversifying or planning to diversify to friendlier business environments abroad in the next three years in order to seek opportunities and to hedge against perceived local political and policy risks.”
“Judging by plunging confidence, the current administration’s efforts to reform the economy is yet to bear fruit. In the meantime, uncertainty is exacerbated through political comments on expropriation without compensation, threats of more punitive Employment Equity and BEE enforcement, the NHI, prescribed assets, and other looming restrictions on market freedom and private property.”
Sakeliga welcomes steps the toward market freedom, evident in the recent policy paper released by the treasury under minister Mboweni. While we cannot support the paper in its entirety, we do welcome its market friendlier proposals, such as an easing of Visa regulations, a proposed review of red tape, exemptions from some regulations for small businesses, a ‘testing’ of Special Economic Zones (SEZs), and steps to ease cross-border trade.
However, in spite of the treasury paper and its evidently uncertain status, the policy environment fundamentally still requires much more serious moves toward market freedom. In the end, government should seek to play a much smaller part in the economy and allow entrepreneurs, investors and other business people the freedom to pursue healthy commercial activity with as little restriction and state interference as possible.
Issued by Gerhard van Onselen, Senior analyst, Sakeliga, 14 September 2019
