South African Business Outlook Rose on Expectations of a Coalition Government

(Bloomberg) -- South African companies’ confidence in the economy improved before last week’s election on expectations that results would produce a coalition government.

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The Business Confidence Index rose to 35 in the second quarter from 30 in the prior three-month period, according to a report compiled by Rand Merchant Bank and Stellenbosch University’s Bureau for Economic Research.

Still, the overall number showed that only a third of the survey respondents were satisfied with business conditions as uncertainty about the election led to a “wait-and-see” approach, RMB said.

“Business confidence ahead of the election showed a welcome up-tick, but remained below the levels conducive to foster increased private sector investment and faster economic growth,” said Isaah Mhlanga, chief economist and head of research at RMB. “Lower inflation through the remainder of the year, and the possibility of a somewhat lower policy interest rate later in the year could boost consumer spending.”

Business sentiment among wholesale businesses improved by 16 points to 53, with consumer-goods traders upbeat about a rise in sales volumes for a second consecutive quarter. All sectors surveyed saw an improvement, other than in vehicle sales.

Sentiment among new-car dealerships fell six points to 10, with buyers sensitive to the nation’s high interest rates holding on to their vehicles for longer. Consumers are “buying down,” according to RMB, and as a result spare-part traders businesses improved.

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