The prolonged electricity shortages, water rationing, and infrastructural deficit in KZN continue to be a major setback for businesses.

This is according to the Durban business confidence index (DBCI) 2023 quarter 1 report, which outlined how the setbacks had a severely suppressing effect on the growth of the KZN economy as well as the business mood of the province.

The DBCI was constructed using survey data collected from senior private sector managers in the eThekwini Metropolitan Municipality.

The study revealed that in the electricity sector in particular, confidence unexpectedly rose by 24,91 index points to 30,21 between the fourth quarter of 2022 and the first quarter of 2023.

“The increase in the index may be explained by the initiatives put forward by the government to deal with the electricity crisis in the country. That is, the declaration of a state of national disaster and the appointment of the electricity minister [in response to severe load-shedding].

Although it has improved, the index in the sector remains significantly below 50, which shows a lack of confidence in the economy among players in the sector. Other factors, such as the increase in electricity tariffs, are also likely to have detrimental effects on confidence in this sector.

According to researchers, the electricity shortage had increased the amount businesses paid each month to maintain standard operational levels, whether it be by installing solar electricity generation equipment, uninterrupted power supply devices, or heavy-duty diesel generators.

The study showed that businesses, both small and large, spend large amounts of money every month to keep the lights on, consequently increasing their direct costs of production.

The levels of load shedding increased from 75 days in 2021 to 207 days in 2022, and the figure is expected to increase more than twofold in 2023 with the more prolonged hours of load-shedding experienced each day.

“In addition, inflationary pressures arising from high interest rates, the weakening of the rand, and high electricity tariffs or power generation costs are adversely affecting Durban’s economy through an increase in the cost of living and investment.”

According to the study, more than 40% of businesses in the Durban area reported experiencing a decrease in orders or sales in the first quarter of 2023, and 23% expected orders to continue to decline in the second quarter of the year.

“The decline in sales is attributed to the rising living costs in the country,” it said.