1.15 South Africa: Business and Consumer Confidence Indexes

Business sentiment deteriorated in South Africa as the RMB/BER business confidence index dropped to 39 in the third quarter— the lowest since the first quarter of 2021. percent month over month) still fell short of pre-pandemic levels. In addition to global factors, the PMI fell below the 50-point mark to 47.6 in July, reflecting dismal performance of the economy, mainly due to idiosyncratic factors, which include the damage caused by flooding in Kwazulu-Natal and the worst power outages on record. However, it recovered in August to 52.1, reflecting easing of power outages—thus pointing to a mild slowdown in the third quarter.

Business sentiment deteriorated as the RMB/BER business confidence index in South Africa dropped for two quarters in a row from 42 in the second quarter of 2022 to 39 in the third quarter—the lowest since the first quarter of 2021 (figure 1.15). The FNB/BER Consumer Confidence Index improved slightly, from -25 in the second quarter of 2022 to -20 in the third quarter, which was far below the historical average reading of +2. Consumers are negatively affected by contractionary macroeconomic policies along with weakness in the global economy.

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In Angola, oil production nudged down from 1.18 million barrels per day in June 2022 to 1.17 million in August. The country’s oil output remains far below the OPEC+ quota of 1.5 million barrels per day (figure 1.16). Substantial investments are needed to shore up production. The government is expected to benefit from the diversification of oil imports from Russia. In addition, reforms initiated in the oil sector, which include a halving of royalties and income tax on marginal discoveries, will attract foreign direct investments. The uptick in production and high oil prices continue to support the economy. The fiscal surplus alongside the positive economic growth rate and strengthening of the kwanza—which appreciated by 30 percent this year—will help to bring public debt down in the near future.

The Ethiopian economy has been severely hit by the driest rainy season on record with the loss of livestock—more than 2.5 million deaths—and crops—more than 70 percent failed between March and May. Agriculture, which makes up 37 percent of GDP, has been the sector most affected by the adverse weather conditions. In addition, ongoing internal conflict in the northern region remains a major obstacle for the country to regain the exceptional average annual growth of 10 percent as it raises uncertainty and drives out foreign investments. Likewise, Kenya’s rebound from the pandemic has been weakened by severe drought and the global headwinds. The PMI continues its downward trajectory for the sixth successive month, down to

FIGURE 1.15: South Africa: Business and Consumer Confidence Indexes 60 30 50 20 10 40 30 –10 20 –20 10 –30 0 –40 20122 20124 20132 20134 20142 20144 20152 20154 20162 20164 20172 20174 20182 20184 20192 20194 20202 20204 20212 20214 20222 Sources: Bureau of Economic Research. Note: Consumer confidence is expressed as a net balance derived as the percentage of respondents expecting an improvement less the percentage expecting a deterioration.

50+ expansion, below 50 represents net negative Net Balance South Africa Business Con dence Index South Africa Consumer Con dence Index (RHS) 50 mark line