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Business confidence at lowest level this year on back of election uncertainty

Apr 10 2019 12:27
Lameez Omarjee, Fin24

Business confidence is at its lowest level this year, according to the South African Chamber of Commerce and Industry's latest business confidence index.

The index dropped 1.6 points to 91.8 in March, the lowest level since the start of the year. The index was 95.1 in January and 93.4 in February.

The figure is also 5.8 points lower than the 97.6 reported in March last year.

The report cites the upcoming general elections as contributing to uncertainty in the business environment.

"The BCI reflects a depressed business climate that is dominated by concerns over continued difficult and uncertain domestic economic circumstances," the report read.

"It is only after the upcoming general election in early May 2019 that one would expect certainty on the elements that impact business confidence."

The rand exchange rate, interrupted power supply, electricity tariff increases and slowing manufacturing output were the largest contributors to the declining confidence levels between February and March, according to SACCI.

Over the past year, the decline in business confidence was influenced by the depreciation of the rand, higher core inflation and less import volumes, compared to the previous month, SACCI noted.

"Merchandise export volume increase was the only notable positive year-on-year contributor to the business climate in March 2019," the report read.

Low global economic growth is also a major concern for businesses.

"Weaker trade and output levels and country specific challenges are adding to pressure on growth prospects.

"Although global output is expected to increase over the medium term - the risks are still slanted towards a weak economic growth," the report read.

As for local developments, a debate on the nationalisation of the SA Reserve Bank also created fears, given the negative impact the loss of the bank's independence would have on the economy.

SACCI noted that ratings agency Moody’s decision not to move on the credit rating provided a short-lived relief. But "weaknesses" in almost all state-owned enterprises, particularly Eskom, is fueling fear of a downgrade in future.

Citing a previous report on load shedding, SACCI said the power outages is having a "devastating negative impact" on business and that it would delay economic recovery.

SACCI has warned that load shedding would lead to job losses and the closing of businesses.

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