September 11, 2019 / 10:00 AM / 10 days ago

South Africa's business confidence slumps to 2-decade low in third quarter

Sept 11 (Reuters) - South Africa’s business confidence plunged to a 20-year low in the third quarter, a survey showed on Wednesday, undermining a push by President Cyril Ramaphosa to kick-start growth after a decade of stagnation.

The Rand Merchant Bank (RMB) business confidence index compiled by the Bureau for Economic Research was at 21 points, still well below the 50-mark separating the net positive and negative territories.

The survey showed that the last time the index was at a similar level was during the 1998-1999 emerging market debt crisis. The index was unchanged at 28 points in the second quarter.

During the third quarter, confidence collapsed in four of the five sectors making up the index, with motor trade being the only exception. The retail and wholesale trades sectors showed the biggest declines.

“To further delay growth-boosting reforms that should have been implemented years ago - such as easing of immigration regulations, cutting red tape, auctioning spectrum and simplifying visa regulations - will simply perpetuate this vicious cycle,” said Ettienne le Roux, chief economist at RMB.

The reading comes after a slew of mixed economic data from Africa’s most developed economy this month, including better-than-forecast second-quarter GDP growth and current account deficit that widened more than expected.

Manufacturing output also fell year-on-year in July after contracting in June, underlining the fragile state of the economy.

Meanwhile, rating agency Moody’s said the country is unlikely to suffer a credit downgrade to junk in the short term.

It said while a downgrade from Baa3 to sub-investment was unlikely in the near term, the slow pace of reform illustrated by ailing state power firm Eskom was a serious risk. (Reporting by Noor Zainab Hussain and Shashwat Awasthi in Bengaluru; Editing by Subhranshu Sahu)

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