What SA needs for turnaround in business confidence

December 3, 2015, 4:19pm

By Carin Smith, Fin24, photo: iStock

Cape Town - To bring about a meaningful turnaround in business confidence in South Africa the business environment and economic policy need consistency and long-term commitment, the South African Chamber of Commerce and Industry (Sacci) said on Thursday.

The latest Sacci Business Confidence Index (BCI) for November shows the comparative year-on-year business climate compared particularly negatively with November 2014.

The Sacci BCI shed 5.7 index points in November 2015 to register 82.7 and is 8.1 points below the BCI of November 2014.

Sacci's BCI in September fell to the lowest level in 22 years, after falling to its lowest level in 16 years in August.

"Recent developments of a global geo-political nature brought more uncertainty to the world economy. However, there are signs in the US and India that some countries might provide traction for the rest of the global economy to move ahead," said Sacci.

"SA has to urgently deal with a policy approach that could take advantage of such positive developments."

Economic activities that form part of the BCI sub-indices did not materially change between October and November 2015, although merchandise export volumes continued to be exceptionally volatile, according to Sacci.

It pointed out that the domestic economy performed below potential and the world economic outlook is below expectations.

The November 2015 month-on-month changes in the Sacci BCI sub-indices were more discouraging than the changes in October 2015. Four of the thirteen sub-indices were positive, five undecided and four negative.

Notwithstanding lower inflation, and unchanged municipal utility services and real private sector borrowing compared to November 2014, all the other sub-indices performed worse than a year ago. Real economic activity as well as financial circumstances were in a worse situation than in November 2014.

"Developments on the geo-political front not only highlighted matters of common interest, but also affected the economies of notably Europe and global financial markets and their interaction in a global context," said Sacci.

"Conversely, there are early signs of more steadiness and expectations of an improving world economy. The Chinese growth will probably reach 7% in 2015 according to an official announcement while the Indian economy is expected to experience accelerated growth."

In late November the latest RMB/BER Business Confidence Index (BCI) showed that business confidence in SA has fallen even further between October 19 and November 16 to reach its lowest level in 5 years.

Underlying activity in sectors such as retail, new vehicle trade and manufacturing weakened by more than it had done in the third quarter, according to this index.

The RMB/BER BCI also found confidence levels among new vehicle dealers to be at the lowest level since the recession in 2009. The only sector where business confidence increased was the retail sector.

Apart from feeling less confident, it seems many business owners also feel less safe. More than 83% of the members of the Cape Chamber of Commerce and Industry, who took part in a recent survey, indicated that they feel more unsafe than they did five years ago.