Business confidence falls to 16-year low and sends rand tumbling
SOUTH Africa’s business confidence fell to its lowest level in more than 16 years due to subdued domestic economic performance and global financial market turmoil, a survey showed yesterday, pushing the rand to a week’s low against the dollar.
The SA Chamber of Commerce and Industry’s (Sacci) business confidence index (BCI) fell to 84.3 points in August, retracting to an even lower level than June’s 84.6 after increasing to 87.9 in July. The index is at its lowest level since January 1999.
The rand fell 1 percent in response to the report, touching a session trough of R13.5735 to the dollar, its softest in more than a week. At 5pm, it was bid at R13.5472, more than 5 cents softer than Wednesday’s bid of the same time.
Sacci said: “The intensity and pace of deterioration in business confidence in 2015 is much faster than in 2014. Notwithstanding the BCI bouncing back in July 2015, it appears that business confidence in August confirms the declining trend for at least the short term.”
The business organisation said the present slow growth of 1.2 percent year on year for the second quarter concerned it.
Sacci said an uncertain local economic policy climate perpetuated the underperforming economy and dwindling local business confidence.
The economy shrunk by 1.3 percent in the second quarter for the first time in more than a year, raising the risk that labour disputes and slowing Chinese demand for commodities could push it towards recession.
Moody’s said on Wednesday that electricity shortages, low commodity prices, a drought, as well as weaker-thanexpected global growth, would constrain the economy over the next 18 months.
Sacci said the volatile and lower commodity prices together with unpredictable financial markets contributed to the uneasiness.
Slower growth in China, a key importer of South African commodities, has had an impact on commodity prices, adding pressure on the mining sector.
Almost 12 000 mining jobs are on the line as mining companies cut costs.
Meanwhile, local business operating conditions in the private sector remained constrained last month. Output and new orders declined further as companies scaled back their purchasing activity, the Standard Bank purchasing managers’ index (PMI), produced by Markit, showed yesterday.
It edged up just slightly to 49.3 points in August from 48.9 in July, holding below the 50 mark for the third month in a row. The 50-point mark separates growth from contraction.
The main downward contribution to the headline number came from a further decline in new business.
“The private sector is facing rising electricity costs and slowing growth both domestically and internationally, as reflected in the intensification of the contraction in the new export orders index,” Naidoo said. “The private sector is in recession and signals from the PMI’s leading indicator suggest ongoing deterioration.”
Meanwhile, the latest Experian business debt index (BDI) revealed the financial health of South African businesses has fallen to its lowest point since the financial crisis in 2009. During the second quarter, the index fell to 0.127 compared with 0.237 in the first quarter.
“Although the reading has remained above the 0.0 level – which distinguishes between improving and deteriorating business debt conditions – it is the worst since 2009, when the index reached negative levels,” Michelle Beetar, the managing director of Experian South Africa, said. “This indicates that the rate of improvement in business debt conditions has indeed diminished significantly, in line with worsening economic conditions both domestically and abroad.”
She said this relative deterioration had gone hand in hand with a gradual increase in the number of outstanding debtor days, from the 43.6 days for October 2013 to 51.4 days in May 2015.
Experian said although June witnessed a countervailing reduction to 49.2 days, the average number of outstanding debtor days of 50.4 in the second quarter of 2015 was the highest in the past two years. –