(Bloomberg) -- South African business sentiment rose its highest level since the first quarter of 2022, buoyed by a constant electricity supply and political stability.
A quarterly business confidence index compiled by FirstRand Ltd.’s Rand Merchant Bank and Stellenbosch University’s Bureau for Economic Research rose to 45 for the three months through December, up from 38 during the prior quarter.
“The continued absence of load-shedding and political stability following the May 29 election has helped with the recovery,” RMB and the BER said in a report published on Wednesday, using the local expression for power cuts. “An improvement in consumer demand seems to have provided a further boost to sentiment in the fourth quarter.”
The improvement marked the third consecutive increase in the gauge, which now stands almost 20 points above a recent low of 27 reached in the second quarter of 2023.
It also underscores the brightening mood among businesses after the post-election formation of a governing coalition, which has made economic growth and job creation its top priority.
The alliance, which joins the African National Congress with the centrist Democratic Alliance and eight smaller parties, was formed after the ANC lost its parliamentary majority for the first time since the end of White-minority rule in 1994.
The data is the latest of recent upbeat readings on Africa’s most industrialized economy. Unemployment in the third quarter decreased to 32.1%, compared to 33.5% in the previous three months, and inflation slowed in October, hardening bets on interest-rate cuts.
All subsectors, excluding new vehicles, saw increases, with building contractors advancing the most. The building contractors’ category jumped 10 points to 51 in the fourth quarter, while wholesale trade rose to 60 from 51. Manufacturing ticked up to 36 from 28 and confidence in the retail sector rose to 54 from a previous 45.
“The further improvement in business confidence is very welcome and is testament to the impact of the gradual improvement on the reform front,” said RMB chief economist Isaah Mhlanga. “However, even though forward-looking indicators remain positive, more needs to be done to ensure that this recovery in confidence can be sustained and improved.”
(Updates with analyst reaction in eighth paragraph.)
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