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Opinion


What comes first, the chicken, or the egg?

It’s actually an economic question rather than a biological one, especially when you consider what comes first, growth or confidence?

Turns out you can have confidence in a low growth environment – but you are unlikely to get growth when confidence is low, as it has been in South Africa ever since the World Cup in 2010. 

The latest confidence index from the Bureau for Economic Research in Stellenbosch shows a big improvement in business confidence after the ANC elective conference at Nasrec in December.

There was strong evidence, from about October last year, that big companies were waiting to see what would happen at Nasrec before making big decisions. Even households were hoarding cash rather than spending it.

Early indications are that the huge pent up demand in the South African economy is about to be unleashed, and expectations amongst motor dealers, retailers, and manufacturers are high.

There was strong evidence, from about October last year, that big companies were waiting to see what would happen at Nasrec before making big decisions. Even households were hoarding cash rather than spending it.

Early indications are that the huge pent up demand in the South African economy is about to be unleashed, and expectations amongst motor dealers, retailers, and manufacturers are high.

Business confidence is determined via a detailed survey amongst 1700 executives across five sectors of the economy. Any number above 50 indicates positive sentiment while anything below that number is negative. This weeks business confidence number of 45, while negative is a massive 11 points higher than the last measure before the elective conference. There have been only 15 times in the past forty years where confidence has risen by 11 points or more.

The turnaround in sentiment is significant.

It’s still not brilliant, but it’s a whole lot better than where we had been in the dying months of 2017.

For those with short memories who bill the Jacob Zuma era as dysfunctional, the confidence indicator is a useful guide to remind us of the fact that South Africa’s politics and business confidence have been intertwined for a very long time. 

Since data gatherers began their work in assessing business confidence, the numbers have varied considerably. Post PW Botha’s Rubicon speech in 1985, the confidence number dipped into single digits. Confidence barely had a pulse. The opposite extreme came when the country was awarded the soccer world cup in the mid-2000’s and confidence peaked at 87.

This week's indicator by no means suggests that the good times are back, and its no guarantee that things will get better, but it does suggest that political leadership makes all the difference when it comes to capital making long term decisions.

We’ve started the year with a bang. Let’s not let it fizzle out.

Bruce Whitfield is a multi-platform award winning financial journalist and broadcaster. He is a sought after public speaker on the political economy.

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