Podcast Summary
Business Confidence Index, Tanzania: The Business Confidence Index in Tanzania saw a modest increase to 38 in Q3 2024, but respondents remain cautious due to uncertainty regarding government policies and the operating environment. Sellers and building contractors expressed the least confidence, while manufacturing remained unchanged.
The Business Confidence Index (RMBB) in Tanzania, as measured by the Power 98.7 Podcast and Iran Merchant Bank, has seen a modest increase to 38 in the third quarter of 2024. This is a three-point increase from the previous quarter, but it's important to note that this increase is less than what was expected given the political stability that followed the elections. The survey respondents are expressing cautious optimism, indicating that they are still waiting to see how the new government will unfold and implement policies before making significant business decisions. There are some notable differences in confidence levels across sectors. While confidence among all sellers and building contractors declined, manufacturing confidence remained unchanged. Specifically, just over half (51%) of all sellers expressed satisfaction with business conditions, while only 41% of building contractors felt the same way. These findings suggest that the business environment in Tanzania is still uncertain, with many businesses remaining cautious in their outlook. Overall, the RMBB index indicates that while there is some optimism, there is still a need for clarity and certainty regarding government policies and the operating environment.
Consumer-facing sectors improvement: Retail and new vehicle dealer sectors show improvement in business confidence, above long-term average for retailers, below for new vehicle dealers, due to lower inflation, stronger currency, potential interest rate cuts, two-port system, and injection of case flows, but logistical inefficiencies remain a concern.
The retail and new vehicle dealer sectors, which are largely consumer-facing, have shown some improvement in business confidence, despite remaining the most pessimistic sectors among all five. Retailers' confidence level is now above the long-term average, while new vehicle dealers' confidence level is still below it. The expectation of lower inflation, a stronger currency, and potential interest rate cuts are contributing factors to this improvement. Additionally, the implementation of the two-port system and the injection of case flows into the consumer sector are expected to further boost these sectors. However, logistical inefficiencies remain a significant concern for all businesses and could be the major hindrance to a more substantial increase in confidence.
Economic demand issue: Higher interest rates have stifled economic growth, leading to a demand issue, and the anticipated interest rate cuts may not provide enough liquidity to boost demand
The current economic climate is experiencing a demand issue, both locally and globally. This is due in part to the prolonged period of higher interest rates, which have stifled economic growth and job creation, leading to higher unemployment rates. Consumers are hesitant to spend on large ticket items, which in turn affects industries like residential construction. The expected interest rate cuts are not anticipated to be deep, as inflation remains high due to the disruption of global value chains. This shallowness of the cuts may not provide the desired liquidity boost. Overall, the demand issue, coupled with the shallowness of the expected interest rate cuts, is a concern for economic confidence.
Global Economic Landscape: Geopolitical shocks, poor policy implementation, and uncertain economic outlook contribute to higher inflation and increased volatility in interest rates, constraining growth
The global economic landscape is undergoing significant changes, leading to structurally higher inflation and increased volatility in both inflation and interest rates. The geopolitical environment is creating shocks to inflation, making it more unpredictable. The economy is currently constricted, with little room for meaningful growth, and uncertainty surrounding the implementation of ongoing reforms is a concern for business executives. Despite some symbolic announcements from the government, the track record for policy implementation has been poor. With a new government in place, there is hope for continuity and faster implementation of reforms, particularly in the energy sector, which could ease the operating environment and help spur growth. However, the overall economic outlook remains uncertain, and the impact of global events on inflation and interest rates will continue to be a significant factor.
Local infrastructure repair: Repairing local infrastructure in crucial sectors like logistics, water, and municipal services is necessary for effective business operation and meaningful growth in South Africa.
While South Africa has made progress in certain areas, such as the elimination of load shedding for over 150 days, there is still a significant amount of work to be done to support meaningful growth and job creation. This includes repairing infrastructure at the local level, particularly in the logistics, water, and municipal sectors, which are crucial for businesses to operate effectively. The economic constraints and need for job creation are urgent issues that require ongoing attention and action. Overall, while there have been positive developments, there is still much work to be done to address the long-standing challenges facing the South African economy.