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JOHANNESBURG – South Africa’s Business Confidence Index (BCI), as measured by the South African Chamber of Commerce and Industry (Sacci) in December, declined 0.9 index points from November’s 96.1 points to 95.2 points, negatively affected by less merchandise export volumes, the decreased real value of building plans passed and fewer new vehicle sales.  

“In the broader context, South Africa has dipped below many of the longer-term trends of economic activity and financial markets in 2018. 

"Though exogenous factors such as the global economic performance were relatively positive for an open economy such as South Africa, the country lagged behind better-performing peer emerging markets,” Sacci said yesterday.

The BCI was also 1.2 index points down on December 2017. 

Although seven of the 13 sub-indices of the Sacci BCI were worse off than a year ago, the general assessment was that the present-day administration acknowledged the huge challenges ahead and the role that a sound economy could play in addressing them.

Sacci economist Richard Downing said among the most ominous signs were the net sales of bonds and stocks by non-residents which spiked sharply from R25 billion in 2017 to R125bn in 2018, which reflected the increased anxiety in investors in the country’s policies, particularly land expropriation without compensation and economic growth concerns.

He said the positives in the BCI sub-components included the South African Reserve Bank’s prudent management of monetary policy and inflation currently at 4.5 percent, well below the 6 percent band.

“They are taking the broader view in containing the inflationary process and that was a positive,” Downing added.

Sacci said business confidence remained on a moderate level throughout last year after the initial positive moves in early 2018. 

“In comparing December 2018 to December 2017, the task of restoring the business and investor climate remains a major challenge,” it said.

Meanwhile, manufacturing production continued to rise in November, albeit at a slower pace, lifting by 1.6 percent year on year following October’s 2.8 percent y/y increase.

Investec’s Lara Hodes in a note said an analysis of November’s underlying data indicated that five of the 10 manufacturing divisions registered gains, with the food and beverages category, which holds the largest weighting in the manufacturing basket, once again the largest contributor to the headline result.

This sub-sector rose by 5.2 percent year on year and added 1.4 percent to the top line number.

Hodes said that while output and sentiment within the manufacturing sector had ticked up somewhat, indicated by the latest Absa/BER PMI readings and the fourth quarter of last year's manufacturing survey results, business conditions remained tough, with local demand still somewhat subdued. 

“Additionally, operational constraints, notably electricity supply shortages and elevated domestic and imported input cost pressures, continue to hamper activity,” she said.