The South African Chamber of Commerce & Industry (SACCI) released their May 2017 Business Confidence Index (BCI).
SACCI’s BCI picked up by 1.7 index points to 94.9 in June 2017 from 93.2 in May 2017. Given the unpredictable economic and political situation, business remained resilient and proved perseverant. In June the BCI was 0.2 index points below last year’s June level of 95.1. The BCI at the moment is informed by deliberations on economic policy that could adversely affect investor and business confidence.
This would cause the economy to stutter further and this while battling recessionary conditions and this could have lasting effects on unemployment, income distribution and rising poverty. However, a realistic that enhances the outlook for the private sector and its ability to mobilise capital could turn the economy away from faltering further.
According to the document by SACCI, “The main contribution to the monthly improvement to the BCI in June 2017 was made by higher merchandise import and export volumes, the improved rand exchange rate weighted against the US dollar, British pound and the euro, and increased new vehicle sales. The largest negative monthly contribution to the BCI was by the decline in share prices on the JSE.”
The stronger weighted rand exchange rate has increased the merchandise import volumes and the lower consumer inflation made the most notable positive year-to-year contributions to the BCI between June 2017 and June 2016.
However, a number of events took place during June 2017 and not only did they increase uncertainty in the economic policy environment and business confidence, but it also affected short-term economic variables and financial markets like the volatility of the rand. These events includes topics like the role of the Reserve bank, mining charter, credit ratings, and FICA applications and needs to be addressed responsibly with investor and business confidence in mind.
“Working in a country way out of a downward phase of the business cycle under normal economic circumstances can be achieved by anti-cyclical policy options that are well known in successful countries,” the document stated.
However, finding a way out of recession given the somewhat less fortunate credit rating makes it a matter of urgency. In-depth discussions on economic direction will have to take place before unintended consequences of economic regression, unemployment, and increased poverty are set in motion that could lead the economy into a long-term trap. However, businesses and households will need convincing when it comes to the road ahead before confidence is recovered.
BUSINESS REPORT ONLINE