South African business climate still gloomy, but 'battling on' - SACCI index


South Africa's business climate, while still gloomy, is not giving up on "battling the odds" in a tight financial environment and subdued economy, the SA Chamber of Commerce and Industry (Sacci) said on Thursday.

In its view, "more painful adjustments" necessitated by subdued economic growth may occur if business and investor confidence are not "inspired" to higher levels.

The chamber released its monthly Business Confidence Index on Thursday. 

The BCI improved slightly by 0.5 of an index point to 92.7 in February 2020 when compared to January. 

The index data shows "nervous business conditions" continue, and the chamber expects that perceptions surrounding the effects of the Coronavirus (COVID-19) will contribute to a "tentative" stance on financial and capital markets.

In February the BCI was negatively impacted by lower merchandise import volumes; retail sales and the rand exchange rate.

On the other hand, positive contributors were increased merchandise export volumes; increased new vehicle sales; and lower core inflation.

READ | Business confidence in 2019 was the worst since sanctions hit South Africa in 1985

Compared to the data from February 2019, the largest negative impact came from lower merchandise import volumes, the depreciation of the weighted rand exchange rate, and manufacturing output.

On an annual basis, higher merchandise export volumes, lower core inflation, and the US-dollar price of precious metals enhanced SA's business climate compared to February 2019.

Sacci points out in its index report that, after the BCI measured 93.1 in December 2019 (the highest level the index reached in the second half of 2019) the domestic and global business climate was weighed down by external factors, in addition to the challenges brought about by the local economic slowdown.

For example, the outbreak and spread of coronavirus has had a significant impact on global financial and commodity markets, affecting global trade and output in certain countries.

Sacci, however, points out that the monthly BCI data did not reflect major effects in South Africa as yet.

The chamber said that in February, like in January, the rand, share prices and international commodity prices like crude oil and precious metals, varied significantly.

"It has become imperative that declining and low levels of business confidence and a non-inspiring environment for fixed investment and slow economic growth call for bold and decisive economic policy decisions," Sacci said.

"Budget 2020 is no stimulatory budget or even a holding operation but is born out of desperation to stabilise and begin restructuring the economy to a sustainable position."

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