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- The seasonally adjusted Trade Activity Index implies that half of respondents experienced better conditions in September than in August.
- Yet, the recovery of trade activity in South Africa is still proceedings slowly.
- The impact of the nationwide lockdown to stem the spread of the coronavirus is also reflected in a number of previous respondents actually having gone out of business.
The recovery of trade activity in South Africa is still slow, as reflected in the latest seasonally adjusted Trade Activity Index (TAI) released by the South African Chamber of Commerce and Industry (SACCI) on Wednesday.
The seasonally adjusted TAI measured 50 in September 2020, implying that 50% of the respondents experienced better conditions than in the previous month of August 2020. If, however, compared to last year September, only 31% of the respondents experienced improved trade conditions.
The TAI still reflects the impact of the coronavirus lockdown on trade. The extended nature of the lockdown had a devastating effect on trade as the "first tranche of the economy", according to SACCI economist Richard Downing.
So great has been the negative impact of the lockdown, that SACCI issued a cautionary note as part of the latest index report to point out that a number of previous respondents have actually gone out of business.
SA's economy has been ravaged by the Covid-19 pandemic, with 2.2 million people losing their jobs in the second quarter as quarter-on-quarter GDP contracted by a record 16.4%. Finance Minister Tito Mboweni has also requested that the Medium Term Budget Policy Statement be deferred by a week to 28 October 2020. According to Mboweni, the country's budget deficit was expected to increase to 14.6% of GDP, a major increase from February's projection of 6.8%.
According to Downing, trade activity in September this year was still down compared to September last year. This appears to be the case in all sectors, except perhaps government-related trade activity and the agricultural sector.
"SA's trade sector took the first knock from the lockdown, especially from the exclusion of certain goods being allowed to be sold," said Downing.
He said that, though the latest index reflects more optimism among respondents, one must keep in mind that it comes from an improvement on a very low level of confidence currently existing in general.
"There is still low demand, while businesses have to, at the same time, still pay overheads. Yet, from this low basis they still expect that things can improve," says Downing.
Most respondents expect trade conditions to improve in the next six months, with 56% seeing trade activity recovering. Last year in September only 44% of the respondents were positive about the next six months – albeit from within a better-performing economy than in September 2020.
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Sales volumes and new orders both increased from low levels in July, while supplier deliveries and inventories were still experiencing restraints in September. Both sales and new orders were still constrained.
Respondents expect sales prices to decline further under conditions of sluggish demand, while input costs are expected to ease somewhat but to remain high and weigh on profit margins. The latest TAI also shows employment conditions weakened notably up to August 2020 where only 30% of respondents were employing more people. However, employment in the trade environment improved with 43% of the respondents suggesting employing more people in September than in August 2020.
In the September 2020 Survey, 45% of the respondents have indicated that they may employ more people in the next six months – slightly down from 47% in August 2020.
