SA has lost its edge – SACCI

Business confidence in South Africa fell to a 12-month low in August, with the nation “losing its edge” as policy uncertainty weighs on economic prospects.

The index decreased to 90.5 in August, the SA Chamber of Commerce and Industry (SACCI) said.

SA slipped into its first recession in almost a decade in the second quarter as President Cyril Ramaphosa tries to restore confidence battered by almost nine years of misrule by his predecessor.

It also comes as the ANC pushes changes to the constitution to make it easier to seize land without compensation and uncertainty lingers over mining rules that have hindered investment.

“Once a healthy and diverse economy in Africa, South Africa has lost its edge”, with mining “missing out on the opportunities of the commodity price cycle”, the chamber said.

The policy environment “has been at odds with the objectives of continuous long-term economic growth and employment, with the varying positions being difficult to coordinate in an all-inclusive framework”, it said.

“Demanding and stark choices may be necessary.”

The rand has fallen 18% against the dollar this year, the worst-performing major currency after Brazil’s real.

While exporters benefit from a weaker rand, this has weighed on the business climate, the chamber said. The gauges measuring exports, retail sales, inflation, metals and the exchange rate declined from the previous month, it said.

The medium-term budget policy statement that Finance Minister Nhlanhla Nene will present on October 24 is the next big challenge for business sentiment and the currency, the chamber said.

The government had tax shortfalls of R30 billion and R49 billion in the past two fiscal years and said in February it would narrow the budget deficit to 3.6% of GDP in 2018-19 from 4.3% last year.

“Nene has to convince investors the government can maintain spending discipline in the run-up to the 2019 elections and enhance economic growth.

“It’s imperative to establish economic performance if the business and investor climate are to be restored and improved.” – Bloomberg

Demanding and stark choices may be necessary.