Business confidence on the economic recovery in South Africa ticked up slightly in June as the government started taking decisive action to deal with the energy crisis and implement wide-ranging structural reforms.
This comes as the composite leading business cycle indicator, released by the SA Reserve Bank (SARB) rebounded in June.
The SARB said yesterday that the composite leading business cycle indicator rose by 0.4 percent month-over-month in June following a 0.7 percent decline in May.
The business cycle in April and May was affected by the floods in KwaZulu-Natal along with the energy crisis, the impact of the Russian/Ukraine war, and economic lockdown in China.
But these economic shocks eased in June, and the indicator saw increases in 5 of the 9 available component time series, outweighing decreases in the remaining four.
The SARB said the largest positive contributors were an increase in the number of residential building plans approved and an acceleration in the six-month smoothed growth rate in new passenger vehicle sales.
The composite lagging business cycle indicator increased by 0.3 percent.
By contrast, the largest detractors were a narrowing of the interest rate spread and a decrease in the US dollar-denominated export commodity price index.
Investec chief economist Annabel Bishop said the government’s reform project under Operation Vulindlela was gaining traction to spur growth.
The energy crisis has been one of the major impediments on investment and economic activity as the ongoing power cuts cripple business and sour sentiment.
Bishop said prior to the shocks to economic systems this year, economic growth rate was slowing notably over the 2010s decade, from above 3 percent year-on-year in 2011.
“The Economic Recovery and Reconstruction plan brought in to address the collapse in economic growth in the 2010s decade, has been spurred on by Operation Vulindlela’s focus on five areas, improving the supply of electricity, water, digital communications, freight transport and visas,” Bishop said.
“President Ramaphosa’s recently announced energy plan focuses on fixing Eskom’s existing stations, renewable and clean energy, removing regulatory barriers for private investment in electricity production, promoting rooftop solar investment and fundamentally transforming the electricity sector to achieve energy security.
“All of these were already contained in Operation Vulindlela but saw slow and/or negligible implementation.”
BUSINESS REPORT