Data published yesterday showed the BER’s business confidence index rose to 38 points in Q3 2024, up from 35 points in Q2 2024. This was the highest figure of the index since Q4 2022. The improvement in business confidence was largely driven by the absence of load-shedding, optimism associated with the election outcome and the formation of the GNU. However, there are continued pressures that are weighing on consumers. High interest rats, sluggish export demand, and a lack of investment, that are all restricting the potential growth in sentiment. Nonetheless, with anticipated interest rate cuts, inflation near the SARB 4.5% mid-point target, and an improvement in the forward-looking investment indicator, there is potential for growth in sentiment in the coming quarters.
Ultimately, however, the outlook for business confidence and the economy rests with the implementation of the GNU’s reform agenda. This was highlighted in comments made by the IMF yesterday. While commending the GNU’s reform agenda, the IMF stressed the need to accelerate efforts for sustainable and inclusive growth. Key priorities include addressing energy and logistics challenges, fostering private sector participation, and enhancing governance. The IMF forecasts just 1% growth in 2024, with structural reforms instead crucial for job creation and long-term prosperity. Moreover, South Africa faces a projected fiscal deficit of 6.2% in 2024, driven by debt and state-owned enterprise support. The IMF recommended a fiscal consolidation of at least 3% of GDP and reducing debt to 60-70% over the next decade to ensure fiscal sustainability.