JOHANNESBURG: Business confidence in South Africa was at an all-time low as a result of political uncertainty, poor economic performance, policy confusion and a general lack of leadership, a turnaround strategist said on Thursday. Alastair Macduff, chairman and chief executive of the Turnaround Management Association Southern Africa (TMA-SA), said South African businesses were in significant distress and the technical recession from which the country has just emerged, coupled with the credit rating downgrade to junk status being felt across all industries, did not help. “Businesses are feeling the impact of low investor confidence, weakening exchange rates and high fiscal uncertainty,” Macduff said. “Restoring investor, business and consumer confidence will require a concerted effort to address these pressing issues – and address them in the best interests of the country as a whole.”
The South African Chamber of Commerce and Industry (Sacci) Business Confidence Index last month declined to its lowest level thus far in 2017 and the lowest levels since mid-80s, decreasing by 5.7 index points from 95.3 to 89.6 between July and August. Sacci said that the business climate remained sensitive to political posturing and policy uncertainty as well as fears about the impact of policy proposals were damaging business confidence, and in particular investor confidence. To make matters worse, South Africa fell 14 positions in the 2017-2018 World Economic Forum Global Competitiveness Index (WEF GCI), leaving the country ranking 61 out of 137 economies assessed in the annual survey. Top among the most problematic factors for business cited in the report were corruption, crime and theft, as well as government instability. Allegations of grand-scale corruption at state-owned enterprises like Eskom, Transnet, Sars, and Denel involving the controversial Gupta family have also left the country and key institutions reeling as evidence mounts of the manipulation of state contracts and the appointment of ministers. Other factors related to the fall in the WEF index released on Wednesday include tax rates, inefficient government bureaucracy, poor work ethic in the national labour force, restrictive labour regulations, inadequately educated workforce, inflation, access to financing, and policy instability.
South Africa also lost its coveted number one spot in WEF Index for strength of reporting and auditing standards, which it had held for seven years. The repercussions of audit firm KPMG’s implication in so-called state capture through the work it did for the Guptas and Sars can also not be overlooked. The survey further noted that political uncertainty in 2017 negatively impacted the confidence of South African business leaders and although still relatively good in the African context, the country’s institutional environment (76th), financial markets (44th), and goods market efficiency (54th) are all rated as weaker than last year. The 2017-2018 WEF GCI also noted that South Africa’s economy is nearly at a standstill, with GDP growth forecast at just 1.0% in 2017 and 1.2% in 2018 – hit by persistently low international demand for its commodities, while unemployment is at 27.7% and rising. Macduff said efforts need to focus on the existing unemployment problem which must be seen as a priority locally. Other challenges needing urgent attention include investor friendly policy amendments and structures to mitigate confusion around the Mining Charter, energy policy and dealing with state-owned enterprise debt. “The good news however is that South Africa has a relatively open economy and a resilient business resolve,” Macduff said. “To survive the current landscape, improved productivity and efficiency as well as diversified skills and flexibility will be paramount. Businesses will also need to find ways to decrease infrastructure and reduce financial risk in their environments.”
