South African businesses remain pessimistic about trade conditions in the next six months as sentiment was still firmly in contractionary levels in June, in spite of an expected improvement in sales in the months ahead.
The South African Chamber of Commerce and Industry (Sacci) yesterday said trade conditions remained largely unchanged in June, maintaining a slightly negative trend consistent with the first six months of 2023.
The survey is conducted by Sacci among its members who are some of the biggest companies in South Africa and the largest employers.
While there were occasional positive seasonal fluctuations, Sacci said overall trade conditions did not show significant improvement.
In June, approximately 55% of respondents anticipated an improvement in trade activities over the next six months, a slight decrease compared with the 59% of positive respondents recorded in January 2023.
Sacci said only around 38% of respondents reported better trade conditions in June compared with the same period in the previous year, indicating a limited positive impact.
Notably, trade expectations had previously exhibited a positive outlook over the past 12 months.
However, Sacci said a noticeable disparity emerged between these expectations and the prevailing trade conditions during the first half of 2023.
Sales volumes experienced a significant decline during the months of May and June, while new orders continued to show negative trends throughout May and June 2023.
Supply chain challenges were evident in May but showed improvement in June.
As a result of declining sales volumes, inventories notably increased in both May and June. Despite 79% of respondents reporting rising input costs and absorbing the associated expenses, weak demand led to a slower rate of increase in sales prices.
However, Sacci CEO Alan Mukoki said despite a decline in current sales volumes, there has been a notable improvement in expectations for sales in the next six months, as indicated by the survey scope.
“This positive outlook is supported by an increase in expectations for new orders. It is also anticipated that supplier deliveries will improve while inventories remain stable,” Mukoki said.
“Over the next six months, there is a possibility of marginal decreases in sales prices and input costs, as the inflationary pressures are expected to ease further.”
Sacci said recent data revealed that real retail trade was still facing challenges, but there have been year-on-year improvements in import and export merchandise trade volumes as well as new vehicle sales.
However, the tourism sector was currently experiencing a declining trend, despite an increase in the number of inbound tourists compared with the previous year.
“The impact of electricity load shedding and efforts to provide alternative power sources continue to weigh on businesses and input costs. Fortunately, there have been fewer disruptions to trade activity due to recent improvements in electricity supply by Eskom,” Mukoki said.
“Higher debt levels and increased interest rates have resulted in higher debt servicing costs, negatively affecting real demand from clients and impacting the financial position of businesses.”
According to Sacci, the challenging trade environment has had a negative impact on employment in the sector.
However, there has been a slight improvement in staff hiring during May and June, although the employment sub-index remains at 42, below the stable level of 50.
Expectations for employment opportunities in this sector over the next six months remain weak.
BUSINESS REPORT