Business confidence falls amid uncertainty

12th September 2018 By: Marleny Arnoldi - Creamer Media Online Writer

The South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) declined by 4.2 index points in August to 90.5, compared with 94.7 in July.

The BCI, nevertheless, remained 0.9 of an index point above the level of 89.6 recorded in August 2017.

The BCI does not reflect business sentiment, but indicates how businesses are reacting to and experiencing the business environment. Only three of the 13 subindices of the composite BCI improved month-on-month in August, while five were unchanged and five turned negative.

Sacci stated the business climate was upset by uncertainty in both real economic activity and financial conditions.

Two of the seven real-activity subindices had negative month-on-month influences and three of the six financial subindices had negative month-on-month effects on the BCI in August.

The largest negative month-on-month impacts were recorded for merchandise export volumes, the weaker rand exchange rate and higher inflation. Merchandise import volumes were the only notable positive month-on-month contribution to the BCI in August.

“It is of concern that the South African economy, since about 2008, has been disconnecting from the average world economic performance and even that of sub-Saharan Africa.

“The positive mood that prevailed at the start of 2018 has been overtaken by uncertainty and events that weigh on the economic prospects of the country – tainting South Africa as a sought-after investment destination,” noted Sacci.

However, Sacci does appreciate that the South African Reserve Bank applied a responsible and transparent monetary policy resulting in price stability and the inflationary process remaining in check, and kept inflation within the target range of 3% to 6%.

“The next big challenge for the business climate and the rand may be the mid-term budget review scheduled for October 2018.

“The Finance Minister will have to convince investors that the government can maintain spending discipline in the run-up to the 2019 elections and enhance economic growth. It has become imperative to establish economic performance if the business and investor climate are to be restored and improved,” said Sacci.