The SA Chamber of Commerce and Industry (Sacci) says while the business confidence index (BCI) for September shows an improvement compared with other months since the start of the lockdown, its steady decline remains a concerning trend.
Sacci chief economist Richard Downing said that higher fuel prices and increased utility tariffs, as well as lack of energy supply and water supply were the major contributors towards low business confidence.
Downing said these factors remained a crucial concern to the business community.
Sacci released its September BCI on Monday. In a statement, the chamber said the country’s business sentiment dropped to a one-year low in the month, showing a decline to 91.0 after registering a high of 97.0 in May.
However, the average BCI of 94.1 for the first nine months of 2021 is a major improvement when compared with the corresponding period for 2020.
“The present business climate appears to have levelled out with the BCI, maintaining pre-Covid levels.
“Since measuring 91.6 in the pre-Covid first quarter of 2020, which fell to 76.4 in the second quarter of [last year], the BCI improved from 94.3 in the first quarter of 2021 to 96.0 in the second quarter, before dipping to 92.0 in the third quarter,” he said.
The July riots in Gauteng and KwaZulu-Natal contributed to the much lower index for the third quarter. Downing said the looting and disruption had its most severe negative month-on-month impact on the business mood, which saw the BCI dip by three index points.
“This was followed by a 1.3 dip in August and a 0.9-point dip in September, showing that the earlier upward momentum of the business climate up to June was disrupted by these short-term declines,” he said.
However, Downing said, compared with a year ago, when the business climate was still on its initial recovery path, the September BCI reflects a much-improved business climate despite the lagged effects of the July disruptions.
There were also positive movements to the BCI, said Downing, who noted positive month-on-month contributions from increased merchandise export and import volumes, and an increased number of new vehicle sales.
He said that improved year-on-year merchandise export volumes, a stronger rand exchange rate, and an increased number of new vehicles sold also made valuable contributions to the business mood when compared with a year ago.
“South Africa has been fortunate that high international commodity prices continued in the third quarter of 2021, reflecting both global supply shortages and strong demand from leading advanced economies’ return to normality. This provided the South African economy with a welcome windfall.”
Downing said the country should try to get to a level above 100 index points.
He said the medium-term budget policy statement in November should give direction on positive economic and business developments going forward.
“Business will be keenly listening to the medium-term budget policy statement to see how the finance minister plans to tackle issues raised and create a business-friendly environment.”
“Business confidence has been dented not only by what happened in July, but also by the radical changes made to the economy. Clear, consistent and investment-friendly economic policy is critical to convincing both local and foreign investors of a reasonable return on investment.”
“Government must re-establish direction going forward in terms of economic policy, which should deal with development issues facing South Africa,” he said.