Increasing business confidence shows cautious optimism

Increasing business confidence in the first survey since the formation of the government of national unity shows cautious optimism about improving business conditions. The improvement in sentiment was likely supported by a continued absence of electricity supply disruptions and political certainty after the election.

Although respondents still noted constraints, especially weak demand, they were less negative about current conditions and were encouragingly more upbeat about business conditions going forward. Mhlanga says for the first time since early 2022, a slight net majority of respondents across the different sectors expect business conditions to improve in the next quarter.

“Business confidence in the sector has been extremely depressed over the last three quarters, with less than two in ten surveyed respondents satisfied with prevailing business conditions. Be that as it may, the sector seems to have bottomed and is slowly recovering. Moderating inflation and the associated reduction in policy interest rates should provide a boost to household disposable income and support the uptick,” Mhlanga says.

On the other hand, wholesalers of non-consumer goods reported that sales performed better compared to the second quarter, with volumes now in line with the long-term average reading, Mhlanga says. Mhlanga says the most notable was a significant decline in the seriousness of the general political climate as a constraint on business and investment decisions. “Indeed, forward-looking investment outlays turned notably more positive in the third quarter.”However, he points out that amid continued pressure on local consumers observed across the sectors and sluggish export demand noted by manufacturers, there was not enough demand to fuel a faster uptick in sentiment.

Jee-A Van der Linde, senior economist at Oxford Economics Africa, says the marginal uptick in the overall index was somewhat underwhelming, considering the slower pace of improvement compared to the previous quarter.

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