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Johannesburg - Business confidence in South Africa has experienced a dramatic jump between May and June, thanks to optimism surrounding opportunities stemming from the 2010 FIFA World Cup.
The Business Confidence Index (BCI) is up in June at 84.8 from 82 in May, according to data released on Thursday. The South African Chamber of Commerce and Industry (Sacci) - which compiled the index - said this is a "confidence boost".
"If the momentum provided by the World Cup is appropriately harnessed, longer-term economic benefits will be realisable," said Sacci CEO Neren Rau.
Rau said the government should market South Africa as an investment destination, not just as a country that can host big events.
"We have proven to the world that we can deal with the perceived risks such as crime and infrastructure," said Rau.
He added that business should also adopt an outward strategy and look abroad for growth opportunities, which may be more forthcoming now that South Africa is enjoying a confidence boost.
Rau said business should rely on overseas markets for growth opportunities, as pinning hopes on still spend-shy South African consumers may protract the recovery.
The BCI real retail sales component is lagging the index - further evidence that local consumers are not committing to durable goods and are, instead, making use of lower interest rates to reduce their still-high debt levels.
Rau said he expects consumer demand to start picking up in the second quarter of the year, albeit at a slower pace.
Meanwhile, the fragile state of European Union economies poses a risk to the local recovery.
"If we are unable to maintain the momentum of the World Cup, we will be impacted substantially," said Rau.
These concerns were echoed by South African Reserve Bank governor Gill Marcus earlier this week. She said that global economies may not have emerged from the crisis, and that the implications for the domestic economy should not be underestimated.
However, the opposite side of the coin is that South Africa was relatively protected from the first round of the global economic crisis and it may buck the trend again.
- Fin24.com