SA business confidence rebounds, but mood is changing

Cape Town – Business confidence picked up in June, but recent events may see the mood change in coming months.

The South African Chamber of Commerce and Industry’s (Sacci) Business Confidence Index (BCI) picked up by 1.7 index points to 94.9 in June from 93.2 in May, Sacci said in a statement on Thursday.

“Given an unpredictable economic and political situation, business apparently remained resilient and proved perseverance.”

The main contribution was higher merchandise import and export volumes, the improved rand exchange rate weighted against the US dollar, British pound and the euro, and increased new vehicle sales, Sacci said.  

The largest negative monthly contribution to the BCI was by the decline in share prices on the JSE.  

The BCI was 0.2 index point below last year’s June level of 95.1, while it averaged 95 in the first six months of 2017 compared to 93.6 in the first six months of 2016 and 93.3 in the second half of 2016.  

In general, the BCI moved sideways since the end of 2015 with an average of 94, reflecting a business environment and business climate that lacks direction.  

The BCI is “informed by deliberations on economic policy that could adversely affect investor and business confidence”, Sacci said.

“This could cause the economy to stutter further while battling recessionary conditions and could have lasting effects on unemployment, income distribution and rising poverty.”

GRAPH: Business Cycles and Sacci Business Confidence (Sacci)

Mood could shift as events hit economy

Sacci said events took place during June that increased uncertainty in the economic policy environment and business confidence.  These included:

• The rand’s 1.5 % decline on June 19, after the Public Protector recommended constitutional changes to be made to the role of the Reserve Bank.
• The Mining Charter, which increased the minimum threshold for black ownership of mining companies to 30%.
• The downgrade by Moody's, which lowered South Africa's foreign and local debt.
• The introduction of the Financial Intelligence Centre Act to combat illegal financial transactions and fraud.

Sacci said that finding a way out of a recession with the current credit ratings makes it “a matter of urgency”.

“Responsible discussions on the economic way forward will have to take place before unintended consequences of economic regression, unemployment and increased poverty are set in motion that could lead the economy into a long-term structural trap,” it said.

“Business and households will have to be convinced of the road ahead before confidence will recover.”   

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