SA business confidence debate continues

Cape Town - While the South African government is optimistic about the prospects of foreign investment in the country, it seems local businesses are not as cheerful about the current conditions.

Business confidence declined further in May, according to the SA Chamber of Commerce and Industry's latest business confidence index (BCI).

The BCI declined by 3.7 index points to 88.9 in May. In April, the BCI dropped by 0.1 index points.

Sacci was concerned as it was the first time in 14 years that the BCI had dropped below 90.

Four of the 13 sub-indices were negative in May, namely manufacturing, real private sector borrowing, and vehicle and retail sales.

At the same time the South African government was pleased with the country's improved position in AT Kearney's 2014 Foreign Direct Investment (FDI) Confidence Index underlined the value it offered to investors, the government said on Wednesday.

The report, which cites South Africa as the only country in Africa on the list of top 25 countries.

"South Africa offers lucrative value and opportunities for international investor partnerships, as the country is uniquely positioned as the gateway into Africa," said spokesperson Phumla Williams in a statement.

Crucial sub-indices

Sacci said crucial sub-indices on physical economic activity retracted on a year-on-year basis in May, including exports and imports.

"Although a more balanced monetary environment prevailed in May, inflation, the rand depreciation, lower borrowing levels, and low commodity prices remain threats to the BCI outlook," the chamber said in a statement.

An appropriate policy response could address, among others, low economic growth, fiscal difficulties, and low domestic savings.

Policies would also have to address more complex problems, such as property rights, unemployment, and the rising levels of labour protests.

"Initial statements and commitments by certain ministers in the new Cabinet are reassuring and could be key to bolstering business confidence in the coming months."

"This, in partnership with the resilience of local business, could also mitigate recent concerns about a local recession."