Business confidence improves in July

Business confidence, a key driver for economic growth, experienced a much-needed boost for the first time in six months.

Business confidence has experienced a much-needed boost for the first time in six months.

Business confidence is a key driver for economic growth. Unless businesses are more optimistic about SA’s prospects, the country is unlikely to see stronger growth.

The South African Chamber of Commerce and Industry (Sacci) announced on Wednesday that its monthly business confidence index (BCI) had risen in July, the first positive movement since January.

“Although there are still major economic challenges facing SA, it appears the downward trend in the business climate since February 2018 has lost its momentum and confidence could turn more positive,” Sacci said. “This mainly depends on the removal of economic policy uncertainties and the nurturing of all global relations for the benefit of SA and all its people.”

However, analysts say policy certainty will probably only happen following the election in 2019. This is despite the government assuring there will be certainty around land reform and the mining charter before the end of 2018.

“Business is not confident to make expansions in capex and labour until after the elections because no-one is certain of how much power [President Cyril] Ramaphosa holds,” said Citi economist Gina Schoeman.

Land reform will remain an uncertainty unless it is clarified, which is unlikely in the second half of the year, she said. “SA’s outlook is still clouded by the land issue. It’s difficult to see how business confidence will sustain a rise for the next year.”

But the increase in business confidence in July is not a significant improvement and policy uncertainty is currently elevated, said Nedbank economist Isaac Matshego.

“The post-election economic policy will be critical. Firm and clear policy will likely only happen after the election, and even after that it will take a while to see real spending,” he said.