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Research Notes are more in-depth analyses undertaken by BER economists and consultants.
Brief note intended as a more regular interface with our clients.
In-depth analysis of important political developments in South Africa.
The Impumelelo Economic Growth Lab is a unit at the BER, focussing on generating policy-relevant work and capacity building to achieve economic success in South Africa. This work is freely available to access on our website.
The RMB/BER BCI remained steady - a level of 33 was registered in the fourth quarter compared to 34 in the third quarter. Since the previous survey, the financial market turmoil increased exponentially and the adverse impact of earlier interest rate increases and higher inflation on the growth of the real economy in South Africa became more apparent. We do not know why these developments did not reduce business confidence as in the past, but speculate that some business people have become slow to adjust their views after years of sustained high growth and the financial market turmoil appears too far removed to directly affect local businesses adversely. The most recent results point to another dismal performance of the economy during 08Q4.
Read MoreIn the latest BER Research Note, Mr Aubrey Matshiqi, provides an analysis of events in the run-up to Polokwane and assesses the political outlook in the run-up to elections next year.
After plunging by a cumulative 28 index points during the first half of 2008, the FNB/BER CCI rebounded during 08Q3, increasing by 5 index points to –1. The rise in can be attributed to a reversal in consumers’ views on the economy and their own finances. However, they have further downgraded the present as an appropriate time to buy durable goods. In our view, the 08Q3 rebound in the FNB/BER CCI does not signal the end of the slowdown in consumer spending. Consumer confidence will most likely resume its downward trend should consumers’ optimistic expectations about the economy and their own finances fail to materialise during subsequent quarters.
Read MoreFollowing statements by the Minister of Water Affairs and after studying other relevant source material, the BER comes to the conclusion that on balance, South Africa is unlikely to be faced with a national water crisis in the short term of the proportion as was experienced recently in the case of Eskom. The real need for concern, however, lies at the municipal level. Serious problems exist and urgent intervention is required. Water shortages and pollution at the local level could have significant real cost implications for business and the health system.
Read MoreRapid economic growth over the past 5 years, with little progress in terms of supply-side adaptation, has resulted in considerable skills shortages in a number of sectors in the South African economy. Although it is difficult to quantify the economic impact of the shortage in the supply of skilled labour, the findings from a number of business surveys and other reports suggest that the skills shortage is one of, if not the, most important constraint to economic growth and public sector service delivery in the country...
Read MoreDuring 08Q3, the RMB/BER BCI declined by a further 11 index points, from 45 during 08Q2 to 34 during 08Q3. Weighing down on business confidence was the deterioration of the global economic environment, as well as the fact that most businesses found themselves squeezed between rapidly rising costs and weaker domestic demand. The latest business confidence results foreshadows that economic growth could be rather weak during the first half of 2009.
Read MoreThe strong GDP growth of recent years, while celebrated by local and international commentators, exposed a number of capacity constraints that may limit SA’s growth potential in future. Although the Eskom power crunch has dominated news headlines of late, the fuel supply disruptions in December 2005 revealed another potential crisis, i.e. in the liquid fuels industry.
Read MoreAfter declining from +22 to +12 during 2008Q1, the FNB/BER CCI dropped by a further 18 index points to –6 during 2008Q2. Consumers have turned negative on the economy and time to buy durable goods, but they are still positive – albeit to a much lesser degree than previously – about their own finances. The sharp decline in consumer confidence foreshadows more subdued household consumer spending and private residential investment during upcoming quarters.
Read MoreAfter dropping by 19 index points during 08Q1, the RMB/BER business confidence index (BCI) declined by a further 3 index points during 08Q2 – from 48 to 45. The results show that there is still pockets of resilience in the consumer sector despite higher interest rates and inflation. The building and manufacturing sector fared dismally.
Read MoreIn response to the deterioration in the electricity supply situation in early 2008, the BER decided to include a number of special questions aimed at gauging the impact of the power outages during January and February on firms as part of its regular first quarter survey. Some of the interesting findings are: Sixty percent of respondents or three out of five held that the power outages had a negative impact on their turnover. Roughly two thirds of respondents reported fixed investment and employment plans to have remained unchanged, whilst a third have downscaled these due to the effects of the electricity crisis. A very small percentage of respondents have taken no steps in order to lower electricity usage or shift usage to non-peak demand periods. Respondents revealed that the additional costs due to unplanned outages will have an impact on selling prices as well as profitability.
Read MoreSouth Africa faces a serious electricity supply crisis over the next 3-5 years. Eskom has embarked on a belated supply capacity building programme in order to restore balance in the electricity market. The most immediate problem is in the field of electricity generation and coal supplies to Eskom’s coal-fired power stations, as well as transmission; however, the infrastructure backlogs in municipal distribution are lurking in the back ground. Fast growth in electricity demand in recent years and an official moratorium on capacity expansion (2001-4) has reduced the reserve margin to worrying low levels where the stability of the entire grid has become compromised. Economic life in SA is adjusting to scheduled load shedding and power rationing and households, industry and commerce face steep increases in electricity tariffs. While it is difficult to quantify the economic impact, there is little doubt that the electricity supply crunch will exert a constraining influence on economic growth until it is solved. The entrance of independent power producers combined with increased efficiency in electricity consumption (read: power conservation and more realistic electricity pricing) has the potential to lift SA from the woods on the electricity front without seriously damaging medium-term economic growth prospects.
Read MoreThe FNB/BER CCI declined by 10 index points – from +22 during 07Q4 to +12 during 08Q1. The increase in the prime overdraft rate, higher food and petrol prices, poorer employment prospects, increased financial market instability and the January electricity black-outs led to the fall in the CCI. Households’ ability to spend will determine if their current still relatively high willingness to spend will also translate into actual sales during subsequent quarters.
Read MoreThe RMB/BER BCI plummeted by 19 index points – from 67 during 07Q4 to 48 during 08Q1. The sharp fall reflects a deepening slowdown in business volumes, profitability coming under pressure, as well as increased economic and political uncertainty. The 08Q1 business confidence results foreshadow a further deceleration in economic growth in 2008.
Read MoreIn view of the dramatic political developments in recent months, the BER sought the objective views on the post-Polokwane political outlook of two seasoned political analysts, i.e. Gary van Staden, and Dr Xolela Mangcu.
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