Business confidence for August remained resilient and at higher levels than before the Covid-19 pandemic and the imposition of local and global economic lockdowns, the SA Chamber of Commerce and Industry (Sacci) said.
The chamber released its business confidence index (BCI) on Wednesday, which showed that confidence levels increased by 5.3 index points in August, reflecting the positive effect that overseas tourism, as well as merchandise import and export volumes, had had on the country’s business confidence in that period.
Data showed half of the 14 sub-indices monitored in compiling the BCI reflected a negative effect on the business climate in August as a result of higher real interest rates, lower share prices and the tangible value of building plans passed.
On the positive side, Sacci showed that inward overseas tourism and merchandise import and export volumes came in support of business confidence. Increased retail sales and output activity of the manufacturing sector were also positive on a year on year basis.
“SA had to deal with fiscal constraints, the interruption of electricity supply and the high fuel prices which rippled through the economy, Sacci CEO Alan Mukoki said. “Although these developments impacted on business confidence, it appears that businesses are capable of at least maintaining some normality”.
He said the recovery in inward tourism from overseas not only positively affected the country's current account, but also benefited various subsectors in the entertaining and catering business sector that have a high employment impact — notably for semi-skilled labour.
Mukoki said real credit extension to the private sector also increased despite higher debt servicing costs, higher inflation and higher real interest rates, which collectively had a greater negative effect on the business climate compared to a year ago.
The global economy and the local economy face a difficult period ahead that stands in the aftermath of Covid-19 and the effects of the Ukraine-Russia conflict, which has translated in the world market to higher fuel and energy costs. The SA economy is additionally confronted by structural deficiencies such as uncertain energy supply, an unsustainable fiscal situation, deteriorating infrastructure and high unemployment.
Sacci economist Richard Downing said a firmer monetary stance to contain inflation further contributed to hardship for households and business universally.
“The situation in SA is further complicated by a consistent lack of sufficient energy supply to the economy. Fiscal constraints as well as other infrastructure impediments constrained economic growth to below 2%,” Downing said.
“Subdued economic performance makes it difficult to create an environment that would entice investors (local and abroad) to investment and thereby push economic growth up in the longer term”.
He added the fixed investment needed by both the private and the public sector is not at a level necessary to inspire and drive economic growth.
“Proper maintenance of infrastructure and the enforcement of law and order to protect existing infrastructure have also become an issue for investors. This insecurity has created serious challenges for logistics and storage facilities,” he said.
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