THE Durban Business Confidence Index for the second quarter of 2023 fell to 37 from 43 in the previous quarter, and well off the high of 44 recorded in the fourth quarter of 2022. It is, however, well above the overall national business confidence index, which has declined for five consecutive quarters to reach 27 index points.
The Durban Business Confidence Index (DBCI) is compiled by the Macroeconomics Research Unit at the University of KwaZulu-Natal which computes data collected from private sector managers in eThekwini Municipality through surveys.
The index ranges from zero to 100. If the index is less than 50, it implies pessimism regarding the current and future economic atmosphere; equal to 50 means the business situation is neutral; and greater than 50 denotes optimism about the current and future economic environment. It is the fourth BCI constructed.
Sectoral differences
Authors Harold Ngalawa, Ntokozo Nzimande and Adebayo Kutu note in the second quarter report that business confidence in the financial sector has been steadily declining, dropping from 37.73 in the first quarter of 2023 to 35.22 in the second quarter of the year.
Community, social and personal services is another sector experiencing a substantial decrease in business confidence. The sector has witnessed consecutive quarterly declines in business confidence from 46.51 in the first quarter of 2023 to 39.96 in the second quarter.
The manufacturing sector has shown improved business confidence in the second quarter of 2023 compared to the previous quarter. Business confidence in this sector has risen from 30.8 in the first quarter to 34.75 in the second quarter of 2023.
The transport, storage, and communication sector has experienced a decline in business confidence, dropping from 66.88 index points in the first quarter of 2023 to 44.51 index points in the second quarter.
Localised commentary
In a postscript, the report adds that reports of the torching of heavy-duty trucks in Kwazulu-Natal and other provinces are highly likely to have adverse effects on business confidence, not only in Durban, but also in the KwaZulu-Natal Province and the whole country.
It is estimated that trucks in South Africa transport nearly two-thirds of total freight weight and approximately three-quarters of total freight value. Given the below-normal and declining business confidence in Durban and South Africa, the news of heavy-duty trucks being torched will further worsen the business confidence levels, which may have negative effects on investment, employment and growth.
The province of KwaZulu-Natal is yet to fully recover from the devastating floods that hit Durban in April 2022. This is the most devastating disaster that has ever hit the province in terms of loss of life, infrastructure damage and economic impact. In addition, the continued electricity shortage, and the 27 June 2023 ‘tornado’ that hit parts of Inanda in Durban, damaging water pipelines, power lines and property, have further caused a major setback in the recovery process. eThekwini Municipality has set up an emergency joint operations team to coordinate the response to the damage caused by the ‘tornado’ as well as heavy downpours in the areas within the neighbourhood of Inanda. This is likely to burden the local budget further. One of the sectors that is likely to be hardest hit is tourism as visitors to Durban worry for their safety, the report notes.
The prolonged hours of power outages continue to exert cost pressure on businesses through the installation of solar power, uninterrupted power supply units and/or large-scale generators that invariably increase the direct costs associated with running a business. Furthermore, the high inflation arising from commodity prices, housing and utilities, transportation, cost of production, miscellaneous goods and services, and electricity prices as well as the high interest rates and the instability of the rand/US dollar exchange rates are adversely affecting Durban’s economy through an increase in the cost of living and investment.
Service Delivery
The report concludes that service delivery perceptions in Durban worsened in the second quarter of 2023, partly explaining the decline in business confidence during the quarter. Among the surveyed businesspersons, 84.6% stated that if they (or anyone else) reported a ‘poor service delivery’ complaint, it is very unlikely that the authorities would attend to it. This represents a 6.6 percentage points increase in the proportion of survey participants that hold this view.
On the list of the poorest services provided by the government,
- the environment (sewerage, solid waste and parks) is at the top (30.8%)
- followed by electricity (23.1%),
- roads (21.2%) and
- public safety (police, fire, and ambulance) (21.2%).
The recent police recorded crime statistics reveal that public safety is deteriorating in KwaZulu-Natal. According to the South African Police Service, in the first quarter of 2023, community-reported serious crimes increased by 17.1% in Durban and 5.1% in KwaZulu-Natal, the report notes.
