Durban - Over the past six months, business confidence in eThekwini has gone on a steady decline.
The business confidence index, compiled by the Macroeconomics Research Unit, University of KwaZulu-Natal, looked at a variety of businesses and found that during the second quarter of 2023, business confidence in Durban declined to 37.28 from 43.27 in the previous quarter.
This is the second consecutive decline of the index following a dip in business confidence in the municipality from 44.04 in the fourth quarter of 2022 to 43.27 in the first quarter of 2023.
The index report, which was launched in October last year, showed that among the contributing factors to the depressed environment was the belief by businesses that service delivery was worsening.
There was also insecurity over sporadic looting incidents and the recent attacks on trucks. Power outages, the increase in the repo rate by the South African Reserve Bank, which is making consumers spend less, public policy uncertainties, and the weak economic performance, including lacklustre growth, were other contributing factors.
The report found that the transport and storage sector recorded one of the biggest drops in confidence.
The report stated that the decline of the Durban business confidence index mirrored the overall national business confidence, which had been declining for five consecutive quarters.
The Durban business confidence index, it said, however, remained higher than the national average, which stood at 27 index points.
“The business confidence index of 37.28 conceals significant variations across different sectors. For instance, business confidence in the financial sector has been steadily declining, dropping from 37.73 in the first quarter of 2023 to 35.22 in the second quarter of the year. This decline can be attributed to the challenging economic and financial conditions prevailing in both domestic and global economies.”
“The transport, storage and communication sector has experienced a decline in business confidence, dropping from 66.88 index points in the first quarter of 2023 to 44.51 index points in the second quarter.
“This decrease can primarily be attributed to escalating fuel costs, uncertainties stemming from the looting incidents in KwaZulu-Natal, and the recurrent natural disasters affecting the province, particularly Durban. The recent torching of heavy-duty trucks in KZN and other provinces are expected to have a further depressing effect.”
Service-delivery perceptions in Durban also worsened in the second quarter of 2023. Among the surveyed businesspersons, 84.6% stated that if they (or anyone else) reported a “poor service-delivery” complaint, it was very unlikely it would be attended to.
This represented a 6.6 percentage point increase in the number of surveyed participants that hold this view. On the list of the poorest services provided by the government, the environment (sewerage, solid waste and parks) is at the top (30.8%) followed by electricity (23.1%), roads (21.2%) and public safety (police, fire and ambulance) at 21.2%.
The report said there was some positive news, the manufacturing sector had shown improved business confidence in the second quarter of 2023 compared with the previous quarter. It said business confidence in this sector had risen from 30.8 in the first quarter to 34.75 in the second quarter of 2023, which was likely attributable to the recent enhancements in the country’s electricity supply.
Professor Irrshad Kaseeram, of the University of Zululand’s Economics Department, said business confidence would continue to drop if lawlessness reigned.
“For business confidence to return and grow to unprecedented heights, we need radical changes (investment, policy improvement and effective management) in a number of avenues: electricity, road, rail, water and sanitation, harbours, private property rights assurance and good governance on all fronts (local, provincial and national).”
Independent economic analyst Professor Bonke Dumisa said as long as criminals, especially those who “led” the looting and the burning of trucks, remained free, business confidence would continue to plummet.
“Investors are asking themselves how safe they are in this province, if they should remain and not invest any further or they should divest,” he said.