Business confidence recovers slightly
BUSINESS confidence ticked up last month, compared with June, but remained sharply lower from a year ago as the economy came under pressure from the Covid19 pandemic, a survey showed yesterday. The Business Confidence Index (BCI) compiled by the South African Chamber of Commerce and Industry (Sacci) recovered further to 82.8 points last month from 81.4 in June, after slumping to 70.1 points in May, but was still 9.2 index points below the level of 92 points reached in July last year.
“The South African business climate is still (vulnerable) to the Covid-19 pandemic and the lockdown process that is in place since the end of March,” Sacci said.
The chamber noted that the lockdown, which the government imposed to try to slow down transmissions of the virus and avoid overwhelming the healthcare system, had adversely affected an economy that was already underperforming, because of numerous structural deficiencies.
“It is therefore essential that the South African government should be sensitive to the effects of the lockdown process and its deleterious effect on the business environment. The balance should rather lean towards opening up activity than following a rigid approach that adds little to mitigating the pandemic,” Sacci added.
On a month-on-month basis, the most negative effects on the sub-indices of the BCI were caused by lower manufacturing output, lower merchandise import volumes, fewer new vehicles sold, decreased real retail sales and disrupted construction activity. Compared with July last year, the annual impact of all the real economic sub-indices of the index were negative, while the financial sub-indices had a mixed impact on business confidence.
Lower merchandise import volumes – reflecting the depressed economy, lower manufacturing output and a weaker rand – were notable and had the worst negative impact on confidence compared with a year ago.
Sacci said allegations of corruption around Covid-19-related procurements and the apparent irregular awarding of contracts to “sudden” businesses owned by friends and relatives of influential ANC members and top government officials were a cause for concern. “This is damaging South Africa’s recovery effort and brings into question the new administration’s intent to stamp out corruption,” the chamber said.
It noted that, in announcing the Covid-19 relief measures, President Cyril Ramaphosa – who in February 2018 replaced former president Jacob Zuma whose near-decade tenure had been shadowed by allegations of corruption – had stated that measures would be put in place to ensure public finances were not irregularly spent.
“This promise has not been fulfilled and raises the issue of credibility. Questions must be asked on whether the state has both the will and capability to root out and stop corruption,” Sacci said.