At the same time, there was a positive response to the 2018 government budget, which reconfirmed the commitment to fiscal consolidation and maintaining the expenditure ceiling. This also helped to avoid a downgrade of South African domestic government debt to sub-investment grade. Unfortunately, the boost to confidence did not translate into a short-term boost to actual growth.
However, the improvements in corporate profits and sentiment have not stimulated business activities of many firms, because these firms still strongly feel that they have excess capacity and employees and that they should reduce their debts to restore financial soundness. In addition, efforts by firms to reduce personnel expenses have prolonged the severity of households’ income conditions.