Confidence in Durban’s business climate has shown drastic improvement in second quarter in comparison to the previous quarter, according to the Durban Business Confidence 2024Q2 report.
The report has been compiled by the Macroeconomics Research Unit from the University of KwaZulu-Natal’s School of Accounting, Economics & Finance and done in collaboration with the Durban Chamber of Commerce and Industry as well as eThekwini Municipality.
The index increased from 38.42 in 2024Q1 to 55.49 in 2024Q2, this means that there has been an improvement of 17.07 index points.
This is the first time since the start of the index in 2022Q3 that the index has breached the 50-point mark which signifies a strong rebound in confidence in the city’s business environment.
While the local BCI generally moves in the same line as the national BCI, it is currently far above the national index compiled by the Bureau of Economic Research (BER), which sits at 35 for 2024Q2.
There was an increase in business confidence for the manufacturing sector from 39.83 to 50.8. The rise in confidence could be attributed to improvements in electricity supply, stabilisation of inflation and the possibility of an interest rate cut toward the end of the year.
Confidence in the electricity and gas sector rose significantly, sitting at 73.81 in 2024Q2 from 36.92 in 2024Q1, which is an increase of 36.89 index points.
The financial sector showed huge improvement, with confidence rising from 33.65 in 2024Q1 to 54.04 for 2024Q2.
Business confidence for the community and social services sector rose from 35.05 in 2024Q1 to 50.31 in the second quarter. This represents a 16.26 increase.
The construction sector’s business confidence improved from 45.77 to 61.59 while the agriculture sector reported a business confidence index of 40.12, representing a year-on-year decline of 18%.
This decline in agriculture means that businesses in this sector are less optimistic in 2024 than in the same period in 2023. This could be attributed to adverse weather conditions caused by climate change.
The wholesale and retail trade sector, which includes the repair of motor vehicles, motorcycles, personal and household goods, catering, and accommodation, significantly improved from 40.04 in 2024Q2 to 65.97 in 2024Q2.
For the transport and storage sector, business confidence rose from 44.49 in 2024Q1 to 68.28 in 2024Q2.
Service delivery
According to the report, service delivery is the biggest challenge that the eThekwini Municipality needs to address.
Of the survey respondents, 76.4% indicated that if they complained about poor service delivery, it is unlikely that the local municipality will deal with it within a reasonable time.
The eThekwini municipality has had to deal with service disruptions due to heavy rains, floods, tornadoes, and an industrial strike of municipal workers towards the end of 2024Q1.
Macroeconomic indicators
KZN reported a marginal positive growth rate of 0.1% in 2024Q1 in comparison to a decline of the provincial economy by 0.2% in 2023Q4.
However, the Durban economy shrunk by 0.2%, which is a slightly higher margin than the national economy’s 0.1% for 2024Q2.
These are the sectors that contributed to growth in the city:
- community services (25.9%)
- financial services (21%)
- manufacturing (14.5%)
- trade (12.4)
- transport (10.8%)
Durban’s unemployment rate dropped from 22.1% in 2023Q4 to 22% in 2024Q1, while unemployment in the province rose from 29.5% in 2023Q4 to 29.9% in 2024Q1. On a national level, unemployment increased from 32.1% in 2023Q4 to 32.9% in 2024Q1.
The South African Reserve Bank (Sarb) has kept the repo rate unchanged in May 2024.
Sarb has managed to keep inflation below 6% since June 2023, while there has been little progress in bringing it down to 4.5%, the middle rate of the 3%-6% inflation range targeted by the Sarb.
This could explain why the central bank has been reluctant to adjust interest rates downwards.
The rand gained 3.43% against the US dollar during the second quarter of 2024, changing from R18.83 against the dollar at the beginning of the quarter to R18.21 at the end of the quarter.
The rand was at its lowest on April 19, 2024, at R19.24 against the dollar and it was highest on June 21, 2024, at R17.95.
IOL Business