Business pulse Q1 2023 | Loadshedding continues to stifle activity
14 Mar, 2023

Momentum Investments have released their report based on ‘Business pulse: Loadshedding continues to stifle activity’ prepared by the Momentum Macro Research Team.

In the article below is a summary of highlights from the team, as well as a downloadable PDF of the research paper.

Commentary and highlights by Sanisha Packirisamy, Economist at Momentum Investments, Tshiamo Masike, Economic Analyst at Momentum Investments and Herman van Papendorp, Head of Investment Research & Asset Allocation at Momentum Investments.

Business Pulse Quarter 1 2023: click here


  • Business confidence, measured by the FNB/BER Business Confidence Index (BCI), worsened to 36 points in the first quarter of the year.
  • Weaker confidence in manufacturing (down by nine points) and retail (down by eight points) mainly drove the decline.
  • Business sentiment is still low against the backdrop of persistent power cuts, low growth in private sector fixed investment, challenges in the logistics network and concerns about current and future weather conditions.
  • Energy insecurity is greatly impeding the business environment. Because of loadshedding, businesses are procuring large volumes of diesel each month to ensure that they remain operational during power cuts. The monthly cost is in the region of millions, which negatively affects businesses’ bottom line. While large businesses have shown financial resilience despite the rising costs, small businesses are affected the most because they cannot afford to acquire alternative sources of energy.
  • Gross fixed capital formation (GFCF) as a share of gross domestic product (GDP) is close to all-time lows. Real growth in fixed investment by the private sector declined by 1% quarter-on-quarter (q/q) in the third quarter of 2022, which is not good for overall GFCF because the private sector contributes the most to growth in fixed investments.
  • Government’s energy reforms are expected to support private sector fixed investment. However, this is only expected to gain momentum from next year onwards. This is informed by Treasury’s estimate of 1.3% this year and 3.8% in 2024 as well as delays in implementing some of the reforms as reported in the Operation Vulindlela (a programme fast-tracking certain structural reforms) progress report.
  • Seasonally adjusted (sa) mining production decreased by 3.4% q/q in the fourth quarter of 2022. This sector is expected to remain constrained if higher levels of loadshedding persist given that the sector is more energy intensive. However, the re-opening of China may provide a slight boost through higher commodity prices.
  • The decline in the ABSA Purchasing Managers’ Index (PMI) to 48.8 points in February 2023 signals lower activity in the manufacturing sector during that month. Moreover, the significant decline in the expected business conditions and business activity sub-indices indicate that the sector will likely experience lower activity in the coming months.
  • The q/q growth rate in the value of business plans passed in the fourth quarter may support activity in the construction sector.
  • Despite growing challenges in the agriculture sector (concerns about El Niño, trade restrictions and animal disease outbreaks), production remains agile.
  • The worsening BCI suggests that business conditions are expected to be constrained. Furthermore, downside risks that informed the decrease in BCI are expected to remain. Consequently, we expect pedestrian growth of around 1% this year and around 1.5% in 2024.





@Momentum Investments
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