JOHANNESBURG – The Business Confidence Index (BCI) compiled by the South African Chamber of Commerce and Industry (Sacci) ticked up slightly to 92.4 points in September, its highest level since June after dipping to 89.1 points in August, a performance attributed in large measure to the perceived consensus around the National Treasury’s economic recovery plan.
The Sacci BCI for September improved by 3.3 points from August, but was still 0.9 points below the level in September 2018. Seven sub-indices of the BCI improved between September and August, including energy supply and precious metal prices.
Increased merchandise export volumes, a stronger rand exchange rate, high new vehicle sales, and a rise in the real value of building plans passed contributed to September’s positive movements.
But three sub-indices, including inflation, imports and real private sector borrowing, remained unchanged.
Sacci said that the improved level of the BCI could contribute to a turnaround in general economic conditions and sentiment and might present a turning point.
“The present improvement in business sentiment calls for continuing positive action to retain the business and economic momentum and provide certainty on economic policy direction,” Sacci said, noting that “it has become imperative to use this window of opportunity to implement proposals for economic restructuring and, with the upcoming medium-term budget, to set the tone for an economic turnaround”.
Business confidence has fallen to the lowest level in more than two decades, with South Africa’s main business role-players sharing the sentiment that inaction by leadership was costing the economy.
Finance Minister Tito Mboweni is expected to announce plans to contain the country’s runaway debt-to-gross domestic product (GDP) ratio and a turnaround plan for Eskom in his medium-term budget.
Moody’s is also expected to keep the country’s investment-grade rating, albeit with a negative outlook – another positive sentiment for investors.
The Rand Merchant Bank/Bureau of Economic Research BCI released recently indicated that the materially higher tax burden was one of the key factors behind the decline in the country’s business confidence.
GDP figures for 2019 so far suggest even milder economic activity, as investment and consumer demand have been under pressure.