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CAPE TOWN - Business confidence in South Africa rose to its highest level in six months on Tuesday, supported by stronger new vehicle sales and the first interest rate cut in five years.

Data released by the SA Chamber of Commerce and Industry (Sacci) showed that the Business Confidence Index (BCI) in July returned to levels last seen in February.

Sacci said the BCI surged to 95.3 points, 0.4% higher than in June, but 0.7% lower than in July 2016.

The SA Reserve Bank took the markets by surprise last month, reducing the repo rate by 25 basis points to 6.75%, citing the improved outlook for inflation as the reason for the cut.

The central bank halved its 2017 growth forecast to 0.5% and trimmed its projection for next year to 1.2%.

Sacci said the main contributors to the improvement in the BCI in July came from higher vehicle sales, the passing of more building plans, lower inflation and higher share prices.

Sacci said the largest negative contributors to the BCI between July last year and July this year were lower merchandise import and export volumes, the rand exchange rate, an increase in the real cost of financing, and lower share prices.

Vehicle sales

Early this month, National Association of Automobile Manufacturers of South Africa said total vehicle sales increased 4.1% between June and July, from 45369 to 46719 units.

Of the total reported sales, about 79.2% represented dealer sales, 13.8% went to rental fleets, 3.9% to government and 3.1% to corporate fleets.

The upbeat Sacci index is in direct contrast with the index issued in June by Rand Merchant Bank (RMB) and the Bureau for Economic Research (BER), which indicated that business confidence in the second quarter of this year slumped to levels last seen in 2009, largely because of persistently weak business activity.

The RMB/BER BCI plunged 11 points to 29 points in the period, with nine out of 10 respondents saying they viewed business conditions as unsatisfactory.

Sacci economist Richard Downing said the ANC’s policy conference last month failed to boost business confidence.

“Business is still waiting for a prescription on the longer term,” Downing said.

-BUSINESS REPORT