Recent indicators point to an economy stagnating ahead of next week’s Budget Speech.

On face value, the latest business confidence index (BCI) update released this week was positive. 

The South African Chamber of Commerce and Industry notes, “It was October 2015 when the SACCI BCI last recorded a level higher than the 117.3 of December 2022. The annual average for SACCI’s Business Confidence Index (BCI) of 109.6 in 2022 also surpassed the pre-Covid level of 107.0. 

However, confidence may have peaked. January 2023 saw a 4.4 point drop in the index from December 2022. 

SACCI’s report notes, “ Energy supply (including electricity blackouts) had a direct and severe negative effect on business confidence in January although the lower cost of fuel provided some relief but remained relatively high (23% higher than a year ago). The lagged effect of the electricity loadshedding is of major concern for other sectors of the economy and business confidence.”

Retail sales also flat

This week also saw the release of StatsSA’s retail trade sales numbers for December 2022. On the upside, retail trade sales for the entire year were 1,7 percent higher compared to 2021. 

However, this post pandemic improvement is ebbing. Once seasonally adjusted, month-to-month changes in retail sales over the last six months were often negative. 

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The business confidence index and retail sales numbers may be pointing to an economy which is stagnating in the face of an electricity catastrophe and a slowing global economy. 

Last month, the Reserve Bank predicted GDP would grow by only 0.3 percent in 2023. The IMF is more optimistic, expecting growth of 1.2%. 

The SACCI report notes, “The advantages of attracting foreign trade and direct foreign investment might speedily dwindle if the energy crisis is not addressed in a meaningful way. The immediate needs of improving Eskom’s current capacity constraints and restoring its full generating capabilities should receive urgent attention.”