SA busi­ness con­fi­dence 7-month low

Eco­nomic pol­icy un­cer­tainty stalks coun­try

The Star Early Edition - - BUSINESS REPORT - Siseko Njobeni

SOUTH Africa’s busi­ness con­fi­dence slumped to a seven-month low in May as a com­bi­na­tion of po­lit­i­cal ten­sions, eco­nomic pol­icy un­cer­tainty and low credit rat­ings con­tinue to stalk the coun­try’s busi­ness cli­mate.

The SA Cham­ber of Com­merce and In­dus­try’s (Sacci) monthly busi­ness con­fi­dence in­dex (BCI) fell to 93.2 points last month, which is the low­est since Oc­to­ber. It fell from 94.9 points in April.

“Height­ened po­lit­i­cal ten­sions, ad­di­tional eco­nomic pol­icy un­cer­tainty and lower credit rat­ings by rat­ing agen­cies that con­verged to­wards the end of March 2017 con­tin­ued to af­fect the busi­ness cli­mate neg­a­tively in May 2017,” Sacci said.

Sacci said the May 2017 BCI was 1.4 in­dex points higher than 91.8 points of May 2016. The fig­ures came a day af­ter Sta­tis­tics South an­nounced that gross do­mes­tic prod­uct (GDP) for the first quar­ter of this year was down 0.7 per­cent, thus push­ing the coun­try into tech­ni­cal re­ces­sion, fol­low­ing a 0.3 per­cent de­crease in the last quar­ter of last year.

Sacci said the largest neg­a­tive monthly ef­fect on busi­ness con­fi­dence came from lower mer­chan­dise im­port vol­umes, lower real value of build­ing plans passed and higher real fi­nanc­ing costs.

Lower in­fla­tion

“The stronger rand ex­change rate and lower con­sumer in­fla­tion made the most no­table pos­i­tive year-on-year con­tri­bu­tions to the BCI be­tween May 2017 and May 2016,” Sacci said.

While the South African econ­omy was rel­a­tively sta­ble last month, “se­vere” con­straints on per­for­mance re­mained. Fitch Rat­ings and S&P’s Global last month kept South Africa’s rat­ing at the same level of sub-in­vest­ment grade as at the end of March. “How­ever, there was a warn­ing that weak eco­nomic growth re­mains a key risk and con­cern about South Africa’s po­lit­i­cal sit­u­a­tion and the lack of state en­ter­prise re­form,” it said.

The re­ces­sion­ary con­di­tions that led to the quar­ter-on-quar­ter de­cline in the GDP in the fourth quar­ter of last year and the first quar­ter of this year con­firmed the present eco­nomic con­straints.

“The sub-in­vest­ment grade since the 2nd quar­ter of 2017 makes it es­sen­tial that a pol­icy ap­proach be fol­lowed that en­hances busi­ness and in­vestor con­fi­dence and pro­mote eco­nomic growth. It has be­come im­por­tant to con­sider a work­able nor­ma­tive eco­nomic ap­proach to the so­cio-eco­nomic chal­lenges of un­em­ploy­ment, poverty and in­equal­ity,” Sacci said.

It said, in or­der to shore up the lo­cal econ­omy, the gov­ern­ment needed to press ahead with fis­cal re­struc­tur­ing to en­sure pub­lic sec­tor debt was be­low 40 per­cent of GDP over the next five to 10 years.

Other im­por­tant steps in­cluded a flex­i­ble labour mar­ket. “The busi­ness cli­mate must im­prove while re­duc­ing the reg­u­la­tory bur­den and pro­mote for­eign di­rect fixed in­vest­ment,” Sacci said.

Ned­bank chief econ­o­mist, Dennis Dykes said yes­ter­day that most of the con­di­tions nec­es­sary to boost in­vestor con­fi­dence had been met. These in­cluded im­prove­ment in com­mod­ity prices and global eco­nomic con­di­tions. “Fac­tors which are de­stroy­ing in­vestor con­fi­dence are do­mes­tic. It is politics and pol­icy. At the mo­ment, there is an­tag­o­nis­tic and anti-busi­ness rhetoric. There is so much un­cer­tainty around cer­tain cer­tain poli­cies,” he said, cit­ing the changes to the Min­eral and Pe­tro­leum Re­sources De­vel­op­ment Act and the min­ing char­ter.

“No busi­ness is go­ing to in­vest if there is un­cer­tainty”.

PHOTO: MATTHEW JORDAAN

A back­log of con­tain­ers is sorted out by Transnet. Eco­nomic ac­tiv­ity in South Africa has ground to halt.

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