- The South African Chamber of Commerce and Industry's business confidence index for January lifted marginally to 94.5, impacted by real economic activity and the financial environment.
- However, 2020's annual average business confidence index was its lowest at 86.5 points, worse than the annual average of 91.5 reported in 1985 amid apartheid economic sanctions.
- Lower inflation and interest rates helped improve the business mode from a year ago, according to the SACCI report.
Business confidence levels in 2020 were at their worst annual average level since the economic sanctions during apartheid, the South African Chamber of Commerce and Industry (Sacci) said.
Sacci on Wednesday released the Business Confidence Index (BCI) for January 2021, which ticked up by 0.2 month-on-month to 94.5 points. The BCI reflects the business climate and how businesses react to or are experiencing the economic environment - it is not a reflection of business sentiment.
The report also reflected on the 2020 annual index which averaged at 86.5 points, its lowest level since the inception of the index in 1985.
"During the economic sanctions period of the 1980s, the 1985 BCI measured the second lowest average of 91.5, followed by the average of 92.6 in 2019. The highest annual average for the BCI was recorded in 2006 at 137.5," the report read.
The BCI recorded its worst level of 70.1 in May 2020.
The index has been experiencing marginal monthly improvements since October 2020, despite the reintroduction of adjusted lockdown Level 3 in late December to curb the second wave of Covid-19 infections. On a month-on-month basis real economic activity and financial performance contributed positively to January's performance.
On a year-on-year basis, the index improved by 2.3 index points in January 2021 - with the financial environment contributing 104% to this performance. Real economic activity had a negative impact (-4%) to the business climate on a year-on-year basis.
"The lockdown had a stifling effect on physical economic activity and output, with a concomitant effect on employment in the formal and informal sectors," the report read.
There were significant positive impacts on the business climate for the month of January from increased merchandise import volume and real retail trade.
"The most negative short-term effect on the business mood came from less merchandise export volumes and less new vehicles sold in January 2021 than in December 2020," the report read.
Sacci pointed out that lower inflation and interest rates helped lift the "business mood" from a year ago. It noted that merchandise export volumes made a "lesser but valuable positive contribution" to the business mood.
"Notably the rand exchange rate against the major investment and trading currencies of the world, as well as retail trade volumes had a negative effect on business confidence if compared to January 2020," the report read.
Sacci added that the budget of 2021/22 to be tabled by Finance Minister Tito Mboweni later this month should pay "urgent attention" to medium-term corrections and adjustments to public sector finances.
"South Africa finds itself in a fiscal logjam and therefore it has become essential to prioritise economic restoration in an unbiased way and simultaneously attend to the health hazard of Covid-19.
"The successful application of a viable vaccine appears to have become critical in addressing the Covid-19 risks and ensure the survival of the economy," the report read.
Government this week took a decision to halt the roll out of the newly sources Oxford/AstraZeneca vaccine, after a trial showed it is less effective against the Covid-19 501Y.V2 variant in the country.