Trade conditions could take more strain from VAT, fuel levy - survey

Cape Town - Respondents taking part in the latest Trade Conditions Survey of the South African Chamber of Commerce and Industry (Sacci) indicated concern about the impact of the 1% value-added tax hike to 15%, and the steep fuel levy increase. Both kicked in at the beginning of April.

Trade conditions continued to be restrained in March, according to the latest Trade Activity Index (TAI) released by Sacci on Thursday. Retail trade in particular remained constrained.

General factors inhibiting trade activity highlighted by respondents also included strikes and related property damage, as well as inappropriate skills in certain sectors.

Indications of restrained trade occurred despite Sacci's view that the local business environment remains conducive to improved business activity.

However, survey respondents indicated that they still have positive expectations from the new political leadership in the country and its ability to formulate economic policy.

The Trade Conditions Survey for March (of which the TAI forms part) measured 43, after coming in at 44 in February 2018.

Survey participants' expectations of trade conditions in six months' time - as reflected in the six-month Trade Expectations Index (TEI) - were still in positive territory, but down to 52 in March after recording 59 in February.

The TEI level of 52 is nearly the same as a year ago, while the TAI was three index points lower in March 2018 than in March 2017.

The survey indicates that, although global trade prospects are still regarded as positive due to commodity prices benefiting exports, the stronger rand inhibited import prices in rand terms. Exports lost some competitive pricing edge due to the stronger rand.

Sales volumes

Sales volumes, supplier deliveries and inventories were the more positive components of trade in March 2018.

Sales volumes improved in March 2018 with the sub-index 3 points higher on 46, but the new orders index down by 6 points to 35. Sales were down from 64 to 58 and new orders from 63 to 51 respectively in March 2018.

Expected sales volumes and expected new orders were both lower. Inventories are expected to remain virtually unchanged in six months' time, with the index at 53.

The sales price index jumped to 59 and the input price index to 72. According to Sacci, these increases were likely caused by the taxes and levies introduced in Budget 2018; they could be once-off and temporary.

Price expectations, however, kept to the same levels as in February.

Sacci  believes the narrowing gap between the sales and input price indices confirms the effects of costs and administered pressures on prices.

The employment sub-index declined to 42 in March 2018, while the employment outlook index for the next six months declined by 7 index points to 46 in March 2018.

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