fbpx

South African Business Confidence ‘Finding It Difficult’ To Regain Rhythm

8 October 2020 – The South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) dipped marginally to 85.7 index points in September, after having improved to 85.8 index points in August.

After declining by 12.1 index points in April and a further 7.7 in May, the BCI had recovered by about 15.7 index points up to August. However, Sacci lamented on October 7 that business confidence appeared to be finding it “difficult” to regain its rhythm as the BCI declined marginally in September by 0.1 index point.

The BCI was still 6.7 index points below the September 2019 level and averaged 84.3 over the first nine months of this year, compared with 92.6 for the comparative period in 2019.

The Covid-19 pandemic and the subsequent lockdown process has had worse consequences for the business climate than the global recession of 2007/8 as the Sacci BCI is currently well below the depressed average BCI level of 113 in 2009, Sacci noted.

However, on a month-on-month basis, the most negatively effected subindices of the BCI were still depressed retail sales volumes, lower share prices on the JSE and less real credit to the private sector.

On the positive side, improved merchandise export and import volumes and manufacturing output made the largest contributions to the business climate in September, and the accommodative financial environment helped to ease some of the difficulties experienced in business. 

The strict and long-running Covid-19 mitigation measures in South Africa and some of the regulatory measures had a significantly negative impact on business, households and government revenue, Sacci explained, noting that South Africa had to manage and contain the public health effects of the Covid-19 pandemic and its “calamitous” effects on business and the economy.

“It appears that the management of the Covid-19 pandemic by government’s Command Council had a relatively successful impact on managing the health pandemic and ensuring mortality rates were much lower than originally forecast,” Sacci said.

It added, however, that the economy had taken the pain in the form of rising unemployment, business closures and the gross domestic product decline.

The restoration of the economy had already begun with the gradual phase-down of restrictions to level 1, but Sacci suggested that this should be expedited and restricted to the highest infection areas and communities without causing further damage to the broader economy.

“Corrective action is necessary for the unsustainable fiscal situation in all public sector institutions. The high-profile public arrests for corruption will go some way to restore local and foreign investor confidence but further structural economic adjustments are required to steer economic policy in a credible direction and towards growth and employment creation,” the chamber said.

It suggested, however, that, as the country remains in a fragile situation, government should continue to pursue enabling policies and an environment that encourages the business sector to fast-track growth and employment creation at a time when the northern hemisphere appears to be heading into a second wave of infections.

By contrast, South Africa appears to have gone past its worst phase of its infections, Sacci said. Source (Engineering News)