Business confidence in the final quarter of the year remained surprisingly steady, Rand Merchant Bank (RMB) and the Bureau for Economic Research (BER) said on Wednesday.
”South African businesses are used to a high degree of uncertainty and volatility. They have coped with both sharp falls [in 1996, 1998 and 2001] and rises [2003 and 2004] in the rand exchange rate, as well as a sharp increase in interest rates over a short period in 1998,” RMB and the BER said.
They added that companies may have become confident in their ability to handle difficult times and therefore were not overreacting to the first sign of change.
During the final quarter of the year the RMB/BER Business Confidence Index (BCI) remained steady at 33, compared with 34 in the third quarter.
Since the previous survey, global financial market turmoil increased sharply. Equity markets tumbled, currencies were volatile, international credit markets seized up and commodity prices tumbled.
”Governments intervened on an unprecedented scale to save banks and prevent financial markets from grinding to a halt.
”What initially started as a banking crisis in the United States quickly developed into a global credit crunch affecting Europe, Japan and eventually emerging markets as well.”
The failure of business confidence to follow the historical pattern was ”curious”.
”In the past, the first signs of weaker business volumes and/or increased uncertainty were almost immediately followed by a decline in the RMB/BER BCI.
A few factors were presumed to have contributed to business confidence ”decoupling” from declining volumes and profitability.
After the longest period of continuous growth in business volumes on record, it might be that some executives were slow to adjust their views. Or they regarded the present faster deterioration in business volumes and profitability simply as a brief, passing phenomenon.
It was also possible that some viewed the current international financial market turmoil as too far removed to directly affect their businesses adversely, especially given that domestic banks and financial markets continued to operate normally.
South African businesses were used to a high degree of uncertainty, the two organisations said. — Sapa