Economists have warned that the government’s failure to listen to the eThekwini business community’s concerns over deteriorating infrastructure poses a risk for the City and the provincial economy.
They were responding to the Durban Business Confidence Index (BCI) report for the fourth quarter of 2023, compiled by the Macroeconomics Research Unit in the University of KwaZulu-Natal’s (UKZN) School of Accounting, Economics and Finance, which found that business confidence recorded a decline of 6.56 index points, quarter-on-quarter, settling at 38.12 in the fourth quarter of 2023.
The report, which was done in conjunction with the Durban Chamber of Commerce and the eThekwini Municipality, found that Durban suffered due to deteriorating infrastructure and the poor state of the beaches, with the hospitality sub-sector hit the most.
The Macroeconomics Research Unit at the UKZN computes the index once every quarter, using survey data of business conditions and business expectations.
It found that year-on-year, business confidence in Durban decreased by 5.92 index points in the fourth quarter of 2023.
The report indicates that the impact on the hospitality sub-sector was particularly significant, stating that “tourism is one of the primary drivers of the Durban economy”.
The report also noted a decline in quarter-on-quarter confidence in the manufacturing sector, but an increase in confidence in the construction sector over the same period.
“There is, however, a high likelihood for this gain to be reversed in the upcoming quarters if the cost of borrowing continues to rise, which in turn may adversely affect business confidence in the residential sector.”
It found that consistent with the trend in the country’s BCI, the “wholesale and retail trade; repair of motor vehicles, motorcycles, and personal and household goods; and catering and accommodation” sector experienced a significant drop in business confidence in the fourth quarter of 2023.
The report found that this is largely explained by stagnant and/or declining real wages, coupled with the rising cost of living reflected in rising interest and inflation rates.
“While business confidence decreased in the City of Durban (both year-on-year and quarter-on-quarter), it remains relatively high compared to its counterpart in the national economy.
“The decline in business confidence in the City of Durban may partly be attributed to losses in coastal and marine tourism, and subsequent adverse spill-over effects during the Christmas festivities.”
Regarding service delivery, the report said that among the survey respondents, 94.1% stated that if they (or anyone else) reported a “poor service delivery” complaint, it was very unlikely that the authorities would attend to it.
“This represents a quarter-on-quarter increase of 15.7 percentage points in the proportion of surveyed businesspersons that feel despondent with service delivery in Durban.”
The report said electricity supply topped the list as the poorest service provided (41.2%) followed by environmental management (sewerage, solid waste, and parks) (29.4%).
Ntokozo Nzimande, research associate in the Macroeconomics Research Unit at UKZN, said the report did not portray a positive situation for Durban business, with the main critique being the slow or non-existent response time to service delivery issues.
“Infrastructure is critical for business and if issues are not resolved or it takes too long to resolve, then business will leave. This is not only a risk for the city but it also poses problems for the province, as Durban is the largest contributor to KZN’s GDP.”
Nzimande said this was not an impossible governance task to rectify, but it needed commitment from government.
“Business needs a conducive environment to function and it becomes frustrating when infrastructure issues are raised continuously and there is a lack of commitment from government to resolve these issues.”
He said infrastructure issues were prevalent in cities where there is a coalition agreement between the ANC and other parties, as service delivery suffered due to disagreements and lack of accountability.
Another economist, Dawie Roodt, said businesses were struggling in cities where the ANC was in coalition with other parties.
“One of the key issues for Durban is that it is a major export harbour and Transnet is collapsing. This has had a major impact on business confidence.”
Roodt said the ANC was failing business by implementing the wrong policies and ideology, and through incompetence and corruption.
“The economy is not growing and some of the problems are due to the storms that hit and the power issue, but the main problem is the government.
“It will take a long time to fix Transnet and Eskom, and business is not sitting on its hands but is making a plan, and this is expensive.”
The Mercury