South Africa

Many companies anticipate retrenchments due to low demand, end of UIF/Ters funds

Cape Town - The bounce back in economic activity with the move to level 3 has since flattened out and many companies anticipate retrenchments due to low demand when UIF/Ters funds are scheduled to run out at the end of June, according to a recent survey.

“In the second week of June, small business turnover fell compared to the first week, dropping from 59% to 54% of the pre-lockdown figure," the survey said. "The fall was centred on Gauteng and the Western Cape. In contrast, turnover in the rest of the country was essentially unchanged.

“The figures at provincial level underscore the extent of the economic opening since May. Travel to work remains lowest compared to January in the Western Cape and Gauteng. It seems likely that the lag in the Western Cape reflects, at least in part, public concerns about the relatively high levels of contagion.”

The weekly Trade and Industrial Policy Strategies (Tips) Tracker survey of the economy and the pandemic conducted jointly with Business Unity South Africa and the Manufacturing Circle highlights important trends in the Covid-19 pandemic and how they affect the economy.

Business Leadership South Africa (BLSA) chief executive Busi Mavuso said: “Business confidence in South Africa is destroyed.”

Mavuso said: “The latest Rand Merchant Bank/Bureau of Economic Research Business Confidence Index (BCI) shows that 95% of businesses are dissatisfied with business conditions - the worst reading in history.

“Business confidence is a leading indicator of economic growth and, therefore, companies that do not believe in the future will not invest and subsequently not expand,” said Mavuso.

Absa Economist Peter Worthington said: “The BCI has now been below the neutral 50-mark that separates satisfactory from unsatisfactory business conditions since Quarter Four in 2014. The BCI is likely to remain subdued for the foreseeable future, given the still elevated uncertainty around Covid-19 and its effect on economic activity.

“It remains to be seen if the government can expedite the delivery of policy certainty and make the state more effective in improving the operating environment for South African businesses,” said Worthington.

Meanwhile, Finance and Economic Opportunities MEC David Maynier on Wednesday visited Calypso Square in Mitchell’s Plain and handed out the first of 11000 Covid-19 Business Safety Kits to the small businesses in the area.

@MwangiGithahu

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Cape Argus

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