Business confidence in South Africa in a ‘desperate position’: Sacci

OCTOBER 8, 2014

Business confidence in South Africa remained low in September, according to the South African Chamber of Commerce and Industry (Sacci) on Tuesday.

The chamber's CEO, Neren Rau, said they were concerned about the lack of urgency in terms of how the business concerns reflected in its Business Confidence Index (BCI) were being addressed.

In September, the BCI gained 0.2 of an index point to 89.2, after having improved by 1.1 index points in August; however, it was still at a significantly low level. The September BCI was 2.2 index points lower than in the same month last year.

Sacci noted that the BCI had averaged 90.3 in the first three quarters of 2014, compared with an average of 91.4 in the first nine months of 2013.

Sacci economist Richard Downing pointed out that it was worrying that business confidence had remained at such a low level over a significant period of time, stating that the BCI had averaged 91 since December 2012.

Rau said that, when the BCI was around the 90-index point level, Sacci described the conditions as “not ideal”; however, since confidence had dropped below the 90-point level, circumstances were “actually looking contractive”.

He noted that Sacci was concerned about the lack of urgency with which the low business confidence level was being dealt with, explaining that, while there were programmes in place to address this, these programmes had long timeframes.

“And many of our businesses will not last through that timeframe to bring about change,” Rau stressed.

Meanwhile, Downing pointed out that business confidence and the state of the economy had a circular relationship, and that if the economy contracts, business confidence is lower, which, in turn, leads to slower economic growth.

He noted that, although four of the seven physical activity subindices of the September BCI were positive month-on-month, compared with only three in August, none of the six financial subindices of the BCI were positive.

Downing explained that this was as a result of the financial subidices being influenced by the real economy.

He further noted that, despite some of the BCI subindices having shown month-on-month increases, all of the subindices, aside from new vehicle sales, were still below longer-term trends, translating into the overall low BCI level of 89.2.

“Sacci is concerned that prospects for the South African economy are becoming more desperate as economic performance and the business mood are at a low ebb. Needs, expectations and demands are not commensurate with output, supply and value added. A series of negative economic and sociopolitical developments are also putting the economic outlook under severe pressure,” the chamber said in a statement.

“We are in desperate positions in South Africa, we must really do something different, something special to get the economy going and to get the business confidence back [on] a faster track,” Downing added.

Rau noted that the upcoming medium-term budget policy statement, to be delivered by Finance Minister Nhlanhla Nene on October 22, was a critical policy event in terms of creating certainty regarding fiscal direction.