Ramaphosa gives strong hint of level 3 review dampening rebounding business confidence
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PRESIDENT Cyril Ramaphosa yesterday gave a strong hint that the government could move the current lockdown restrictions to a higher level as new Covid-19 cases continue rising, dampening rebounding business confidence at a time when it was still trying to recover to pre-pandemic levels.
Ramaphosa said the government was considering reviewing the current lockdown restrictions and moving the country to a higher level.
South Africa moved to a level 3 lockdown on Tuesday last week, introducing further restrictions around gatherings, the sale of alcohol and a tighter curfew.
“Infections are rising and that calls on us to review where we are. We will be making an assessment,” Ramaphosa said.
The president’s concerns come as business activity continued to pick up at the beginning of the second quarter of 2021 with the composite leading business cycle hitting an eight-months high in April.
The South African Reserve Bank (SARB) said yesterday that the indicator rose 3.7 percent month-on-month, from a revised 2.2 percent rise in March. This was the largest increase in the leading indicator since August last year, mainly due to the impact of the low-base effects from the initial Covid-19 lockdown last year.
The leading indicator has shown a strong upwards trend since June 2020, likely indicating that the business cycle in South Africa was near to exiting its downwards phase.
Business activity was severely disrupted during the hard lockdown in April last year as Covid-19 was spreading rapidly in the country.
Investec chief economist Annabel Bishop said the indicator showed a very strong acceleration in gross domestic product (GDP) growth from the fourth quarter of 2021.
The leading indicator leads GDP activity by over six months, giving insight into economic activity in the first quarter of 2022.
Bishop said South Africa’s financial cycle had been in a downwards phase for four years, but was being pulled out of it now by the strength in equities and house prices.
“The leading indicator readings for the second, third, and fourth quarters of 2021 also show good acceleration in GDP growth over the preceding quarters and as such, indicate the economy is likely to continue to recover this year,” Bishop said.
“Further lockdown restrictions (however) are likely as the third wave gains hold across South Africa.”
SARB said eigth of the 10 available component time series increased while the remaining two component time series went down.
The largest positive contributors were an acceleration in the 12-month rate of increase in the composite leading business cycle indicator of major trading-partner countries.
The improvement in the RMB/ BER Business Confidence Index also boosted the indicator.
This was supported by the Bureau of Economic Research (BER) report yesterday which showed that business confidence surged across all trade sectors in the second quarter of 2021.
Retailers, wholesalers and new vehicle traders were optimistic about improved trading conditions and higher sales volumes.
However, BER also warned that the third wave of the Covid-19 pandemic and renewed lockdown restrictions would harm the sector.
The third wave of Covid-19 sees Gauteng in the grip of the raging pandemic, recording an average of 15 000 cases in only two days.