- 4th Apr 2023
- Posted by: Gil Harper
- Category: Uncategorised
The iLembe Chamber of Commerce, Industry & Tourism, in partnership with Enterprise iLembe, have jointly produced the iLembe Business Confidence Index (iBCI) year-end 2022 which considers economic and market-related aspects that have a bearing on the business mood amongst businesses in the iLembe district.
A concerted effort is required to address basic issues affecting business in the iLembe municipal district.
This is the finding of the iBC year-end 2022, a collaboration between the iLembe Chamber of Commerce, Industry & Tourism and Enterprise iLembe.
The latest iBCI in the iLembe municipal district found that refurbishing ageing infrastructure, enhancing law enforcement, curbing community unrest, reining in the cost of doing business and removing red tape were top of the requirements for businesses to succeed and overcome the numerous structural and other economic challenges.
The measurement of business confidence is considered significant since it indicates the current and expected state of a region’s economy. It is widely recognised that business leaders’ subjective, individual expectations play a key role in business investment decisions. It is also considered as a good indicator of the overall business cycle in South Africa and its regions.
Challenges
The iBCI was shaped by a number of macro and local factors – Eskom’s record levels of rotational loadshedding, record high fuel prices, and the impact of the Transnet strike in October 2022 on operations of the Durban Harbour.
At a regional level, the delay in repairing critical roads following the KwaZulu-Natal floods of April and May 2022, the closure of the adjacent Durban and wider eThekwini metro beaches due to critically high E. coli levels, and Tongaat Hulett’s business rescue intervention towards the end of October 2022, formed the background to a challenging second half of 2022.
Highlights and key findings
• Negative business sentiment resulted in the iBCI 2022 Survey Index and Economic Activity Index both declining into negative territory, recorded at 49 index points, a decline of 1.1 index points compared to the first half of 2022, and a 3.7 index point decline year-on-year.
• The iBCI Survey Index component, in which regional business leaders and investors indicate their sentiment about the region’s economic and business performance, remained in negative territory at 42.5 index points – the lowest level recorded since the first half of 2021. The iBCI Economic Activity Index component remained unchanged at 55.6 index points, the fifth successive period of positive economic prospects for the iLembe district.
• The performance of the business indicators included in the iBCI Survey Index was varied against the levels recorded in the previous survey period, with all the indicators, however, being in the negative.
- Sales Volumes (45.5;>3.8), as a measure of business performance, return on sales efforts and trading location, and Order Book (38.5;<4.4), as a leading indicator of market depth and liquidity, remained firmly entrenched in negative territory.
- Levels of Employment (40.0;<4.2) remains persistently negative, symptomatic of the adverse events and economic conditions on employment and social security in the region.
• With regards to business confidence per economic sector, three sectors recorded positive business confidence, i.e. above the neutral level of 50 index points. These sectors were Energy, incl. Oil, Petroleum and Gas sector (51.3;-); Wholesale; Retail; Vehicle Trade sector (54.2;0); and Arts, Culture and Creative Industries sector (57.5;<5) being the most confident.
- Business sentiment in other prominent regional sectors was in the negative, namely Manufacturing; Assembly sector (30;<9.7); Agriculture, Forestry and Hunting sector (40.5;<14.0); Construction, Property Development, Property Sales sector (40.7;<6.6); and the Tourism, Catering, Accommodation, Property Management sector (44;>3.3).
- Business confidence in the Tourism, Catering, Accommodation, Property Management sector remained entrenched in the negative, despite a slight improvement from the gloomy sentiment expressed during the previous six-month period.
- Responses indicated that general trade in this sector has not yet recovered to pre-Covid levels, and that international tourists, especially, are still less than 2019 levels.
- Respondents indicated that 2022 visitor numbers were an improvement on the previous year and that domestic marketing is proving beneficial.
- In addition to the impact of the cost of fuel on the travel decisions of holidaymakers, increases in revenue were negated by sharp increases in input costs, especially fuel for stand-by generators. One business reported that generator fuel equates to 2% of its turnover, whilst others reported that the need for electricity generation doubled their operational electricity expenses.
- Several respondents highlighted the water quality issues which resulted in the closure of a number of Durban and wider eThekwini Metro beaches, and the confusion about whether those issues extended into the KZN North Coast. There was consensus among respondents that local tourism role players have their work cut out to ensure that the KZN North Coast brand does not experience collateral damage.
• Business sentiment in the Construction, Property Development, Property Sales sector continued its slump, with this key sector in the iLembe district’s economy becoming the fifth least confident business sector.
• Sentiment in the Agriculture, Forestry, Hunting sector declined by 14 index points, mainly on the back of the Tongaat Hulett business rescue intervention and the uncertainty it placed on the entire sugar value chain, including cane supply, milling operations, refining, and animal feeds.
• The strike in October 2022 that crippled South Africa’s ports, including Durban, contributed to business sentiment in the Transport, Distribution, Warehousing, Storage, Freight Forwarding, Shipping & Exports sector declining by 19.1 index points and resulting in this sector being the second least confident sector. The “dismal” road infrastructure repairs and maintenance following the 2022 floods have added a daily burden of inconvenience of operators in this industry.
• The Manufacturing, Assembly sector was the least confident business sector. Loadshedding/load curtailment, power outages, industrial and especially community unrest, inadequate security, and decaying and inadequate infrastructure in industrial nodes, continue to take its toll on this labour-intensive sector.
• The Mandeni Local Municipality (31.9;<4.1), which hosts the Isithebe Industrial Estate, the manufacturing heartland of the iLembe district, remained the least confident region in the iLembe district.
The most confident local municipality was Maphumulo (72.5; ‒), whilst KwaDukuza (43.5;<.3) declined by 0.3 index points to entrench itself in negative sentiment.
Business outlook for next six months
The iBCI Survey component also reflects on business expectations and business outlook over the next six months.
Business expectations for the first half of 2023 remain negative, being recorded at 44.4 index points, 4.6 index points more negative than the current sentiment.
• The Activity Index of the composite iBCI remained unchanged in the second half of 2022 at 55.6 index points, confirming that the business potential in the iLembe region is at a better level than what businesses in the region actually experience.
• The two market-related indicators of Market size and the economic decline, and Competitiveness and adaptability were indicated by 60% of participating businesses as constraints to conducting business in the iLembe district.
- The public sector indicators of Service Delivery & Infrastructure Provision (41%), Regulations and Compliance (31%), and Property Rates and Taxes (28%) were selected by all the business respondents as primary business constraints.
2021/22 Christmas holiday trading
Enterprise iLembe’s Tourism Performance Bi-Annual Report for the period July to December 2022 indicates that Ballito, specifically, welcomed 108 447 visitors, with occupancy levels of 89%. This was an increase of 24% compared to December 2021, and compared to 79% in 2019.
Respondents to the iBCI Survey component also indicated that 2022 visitor numbers were an improvement on the previous year and that domestic marketing is “starting to pay off”.
Looking ahead
Cobus Oelofse, CEO of iLembe Chamber of Commerce, Industry & Tourism, said high inflation and a stricter monetary policy stance accompanied by electricity supply shortages (even during the holiday period) carried the prospects of tough business conditions ahead and placing a lid on economic expansion and fixed investment.
“Notwithstanding, established business’ resilience and endurance could utilise the positive business prospects to its benefit and bolster business in the iLembe region. Tourism remains a pivotal activity for the iLembe region, and an important business link to other sectors with the potential to restore normality.
“Inflation is slowing and gives rise to a less strict monetary policy stance. This is supported by stabilising fuel prices.
“Increasing electricity and water tariffs, and more frequent power outages, could, however, contribute to price instability and hardship amongst households and businesses. Unemployment will remain rigid and unacceptably high and could lead to further socio-political disturbances.”
Linda Mncube, CEO of Enterprise iLembe, said the private sector and all levels of government within the iLembe district are committed to dynamically partnering on specific initiatives to stabilise the economy.
“This will aid the viability and growth of small and medium enterprises and secure investment in key economic sectors and geographies in our district. The potential exists!”