Durban businesses are widely pessimistic about the economy although they expect productivity to ramp up ahead of the festive season, the first edition of the Durban Business Confidence Index (DBCI) report has revealed.
Launched at Investec in Umhlanga on Thursday, the new DBCI has been developed by the
University of KwaZulu-Natal‘s Macroeconomics Research Unit (MRU) in collaboration with the Durban Chamber of Commerce and Industry (DCCI) as project manager, and funded by the eThekwini Municipality.
MRU Professor Harold Ngawala shared the benefits and the key findings of the index with local business leaders. The debut index focuses on the third quarter of 2022.
Ngawala said the benefit of the index for policymakers was that it provided a broader understanding of the degree of sentiment towards risk-taking by business, and the expected future of economic activity. For businesses, it improves the ease of doing business by providing data on when to expand, downsize and “wait and see”. He added that it would also attract new investment as it removed uncertainty from the operating environment.
According to the first index, Durban business leaders’ “pessimism” recorded a confidence level of 35.7 during the third quarter. The index varies between zero and 100, where an index of zero reflects “extreme lack of confidence”, an index of 100 shows “extreme confidence”, and 50 indicates “neutrality”.
The negative mood or sentiment of businesses in Durban mirrors the national BCI computed by Stellenbosch University’s Bureau for Economic Research which recorded 39 for the same quarter.
Ngawala said the lower business confidence in Durban may be related to the lagged effects of the devastating floods in April and the civil unrest in July 2021. A total of 826 companies were impacted by the floods, which caused R7 billion in damages and led to 31 220 jobs being affected, of which 68% were based in the eThekwini Municipality.
“The recorded Durban BCI is also driven by rising inflation and interest rates, supply chain bottlenecks, load-shedding, labour costs, uncertainty, and the province’s economic prospects,” the index report noted.
It revealed that nearly 71% of respondents had expressed a lack of confidence in the KwaZulu-Natal economy, but when considering the outlook for the next three months, this improved slightly to 67.9%.
“Business leaders in the Durban area expect inflation and interest rates to rise in the fourth quarter of 2022, which may worsen their access to credit and thus their ability to expand or increase capital. The survey respondents indicated that their financial conditions are already tight. Therefore, the expected changes in inflation and interest rates will only worsen the present situation,” the report said.
However, the outlook for production was positive. More than 50% of businesses surveyed expect their production levels to rise and at least 30% anticipate that employment will also rise in the last quarter of 2022. This could possibly be attributed to an expected increase in demand for goods during the festive season.
Durban Chamber of Commerce and Industry CEO Palesa Phili said business leaders were committed to partnering with the government to reposition the city as a destination for trade and international investment.
She said the DCCI’s four priorities were to partner with local and provincial government and improve and encourage investment in the city’s water, sanitation and electricity infrastructure, as well as security. She said the aim was to ensure infrastructure was resilient so that it could withstand future floods.
“The DCCI is at the forefront of projects involving water and sanitation to ensure our tourism industry is not affected by the closure of beaches, which is devastating and giving us a very bad name. Our members have undertaken to work very closely with the city and have organised a partnership with the city and province to invest in this infrastructure,” Phili said.
The new index would help the city to develop conditions that were conducive to business and investment, she added.
“We are pleased to announce that the DCCI, in partnership with UKZN and eThekwini Municipality, has come up with a tool that will ensure we measure how businesses feel about the environment and also influence policies to ensure we have a conducive environment for businesses to be successful,” she said.
