iLembe Business Confidence Index (iBCI ) - 2018 Mid-Year

2018-09-14

• Business confidence in the iLembe District in the 1st half of 2018 has remained unchanged from its lowest ever level, recorded in the previous half-year period.
• The combined hybrid iBCI for the 1st half of 2018 showed an immaterial adjustment of .1 index points compared to the 2nd half of 2017, the 2nd lowest level recorded since the commencement of the index in2015.
• The survey component of the iBCI, which was conducted in July 2018 and which records subjective business sentiment, was recorded at the all-time low of 35.3 index points, 3.9 index points down from the 2017 Year-End level, the previous low.
• This level is also a significant 17.1 index points lower than the highest survey component points recorded in the 1st half of 2017.
• The agriculture, forestry, hunting sector featured as the most confident economic sector. Together with construction, property development, property sales, these sectors were ahead of tourism, catering, accommodation, property management which remained the third most confident economic sector.
• The manufacturing, assembly sector tumbled, from the most confident sector in the previous period, to only the 4th most confident sector. This deterioration resulted from the ongoing spates of industrial unrest, community protests and interference with business operations in the region's main industrial areas.
• The negative sentiment around tourism, catering, accommodation, property management continues with businesses confidence in this sector retracting by 21.4 index points over the past two periods. This deterioration, despite the continued popularity of the KZN North Coast as a tourist and event tourism destination, relates to concerns about the management of public spaces, especially beach nodes and facilities such as ablutions, and a disregard for municipal by-laws and the associated anti-social behaviour. Further concerns relate to "overtrading" in certain tourism subsectors, the persisting seasonal nature of tourism, skills availability, and the pressure on leisure spending due to the increase in VAT and escalating fuel prices.
• The deterioration of sentiment in the wholesale, retail, vehicle trade sector was substantiated by a number of comments, including concerns about the size of the local market and "too much competition", customer safety, theft and diminishing spending power due to VAT, fuel price increases and rates being levied on businesses. Opportunities offered included improved traffic management and efforts to attract additional business and visitors to retail nodes.
• The factors contributing to the retracting sentiment in the construction, property development, property sales sector remained unwieldly administrative processes, a lack of support by both the private and public sector for local contractors and professionals, late or no payments, and the lack of national investor confidence that is preventing significant international investors to commit to the region (coupled with the fear that local investor interest is not adequate to unlock the region's full economic potential).
• The Ndwedwe Local Municipality was the only region to record positive business sentiment.
• The overwhelming negative sentiment expressed by respondents in the Mandeni Local Municipality, home to the Isithebe Industrial Estate, is especially concerning. The mood in the region, which was the most confident in the previous period, was severely impacted on by the ongoing disruptions to business operations.
• Business confidence in KwaDukuza also retracted, with disruptions in peri-urban areas impacting on the commute of workers being highlighted as a concern.
• The business outlook for the 6-month period July to December 2018 was recorded at its lowest level, since commencement of the iBCI, at 41.4 index points, a disappointing 6.6 index points down from outlooks for the 1st half of 2018, the previous lowest period.
• The iBCI Activity Index gained 4.2 index points and measured a positive 50.4 in the 1st half of 2018, compared to 46.2 in the 2nd half of 2017. This is .9 index points higher than the previous highest activity index level recorded in the 3rd quarter of 2015. The positive Activity Index is a welcome retort to the negative sentiments expressed through the survey and business expectation components of the iBCI. It is however apparent that businesses are experiencing conditions worse than what is indicated by the activity index.

• The consensus is that the positiveness during the 1st quarter of 2018 retracted, mainly due to weak business activity and resulting disappointing economic growth figures, exacerbated by the fuel price and VAT increases, as well as local and international concerns around uncertain land policies, especially.
• The major challenges for South Africa's economy remain slow economic growth, structural unaffordable public finance exposure, public sector management matters and insufficient fixed investment by the private sector. The debate on the land and amendment of the Constitution has entered an additional uncertainty.
• The continued poor performance by the domestic economy into 2018 (GDP growth of 0.8% y/y in the 1st quarter 2018) and an anticipated 1.3% for the whole of 2018, are accentuating the desperate need for policy certainty and a feasible economic policy direction.