If a business in Durban is to report poor service delivery to the municipality, it is almost guaranteed that the authorities will do nothing about it.
This, combined with the city’s deteriorating infrastructure and the poor state of its beaches, is why business confidence in Durban is as low as the supply of water in many areas.
The Durban Business Confidence Index (BCI) – a measure of the present mood or sentiment of business people in conducting their day-to-day work in the greater eThekwini Municipality – is currently a woeful 38.12 out of 100.
This data is computed each quarter by the Macroeconomics Research Unit at the University of KwaZulu-Natal; a BCI of 50 indicates that the business situation is normal/neutral while less than 50 denotes a lack of confidence in the Durban economy and greater than 50 shows confidence in the economy.
The business sentiment level for the fourth quarter of 2023 (Q4:23) is 6.56 index points lower than the previous quarter in which there had been a notable index point improvement. The index points for the final three quarters in 2023 were:
- Q2:23 – 37.28
- Q3:23 – 44.68
- Q4:23 – 38.12
The Durban BCI report says the decline in business confidence in the city may partly be attributed to losses in coastal and marine tourism, and subsequent adverse spill over effects during the Christmas festivities.
“The tourism sector in Durban has suffered due to deteriorating infrastructure and poor state of the beaches, with the hospitality sub-sector hit the most. Tourism is one of the primary drivers of the Durban economy.”
In addition, an overwhelming majority of survey respondents (94.1 percent), stated that if they, or anyone else, reported a ‘poor service delivery’ issue, it is very unlikely that the authorities would attend to it. This represents a quarter-on-quarter increase of 15.7 percentage points in the proportion of surveyed business people that feel despondent with service delivery in Durban.
Not surprisingly, the report states, a relatively large proportion of the respondents (82.4 percent) indicate that they do not have confidence in the current economic situation in the province of KZN generally.
“Once again, electricity supply tops the list as the poorest service provided (41.2 percent) followed by environmental management (sewerage, solid waste, and parks) at 29.4 percent.”
At 5.8 percent, road infrastructure is the least of the worries facing business people.
While overall business confidence in Durban has dropped lower, there are some differences across sectors. The Index reveals these to be the varying business confidence points in Q4:23:
Manufacturing sector: 38.08
This is a significant drop (13.59) from 44.76 in Q3:34
“Year-on-year, business confidence in the manufacturing sector decreased by 5.61 index points in the fourth quarter, compared to an increase of 13.01 index points in the third quarter of the same year.”
Construction sector: 62.65
This is a substantial quarter-on-quarter improvement. The report notes that there is, however, a high likelihood for this gain to be reversed in the upcoming quarters if the cost of borrowing continues to rise; this, in turn, may adversely affect business confidence in the residential sector.
Wholesale and retail trade: 27.7
Business confidence in this sector declined by over 30 index points compared to 59.35 in Q3:23. This is largely explained by stagnant and/or declining real wages coupled with the rising cost of living reflected in rising interest and inflation rates.
This sector includes repair of motor vehicles, motorcycles, and personal and household goods; and catering and accommodation.
Financial intermediation, insurance, real estate, and business services’ sector: 51.69
This is a 15.75 index point increase from 35.94 in Q3:23. The report says this positive shift in this sector is primarily attributed to the anticipated easing of financial market conditions globally. As inflation subsides, there is an expectation that central banks, including the South African Reserve Bank (SARB), may consider reducing interest rates.
“Therefore, further enhancements in business confidence within the financial intermediation, insurance, real estate, and business services sectors are likely in the subsequent quarters.”
Business confidence: KZN vs South Africa
While business confidence decreased in the City of Durban, it remains relatively high compared to its counterpart in the national economy. South Africa’s business confidence for the Q4:23, as reported by the Bureau of Economic Research (BER) and the Rand Merchant Bank (RMB), stands at 31, down from 33 in Q3:23.
“This is despite the improved electricity supply and the increased level of economic activity associated with the Christmas festivities in the fourth quarter of 2023,” the BCI report states.
IOL Business