Sacci reported a decline in the Business Confidence Index in July after a marginal improvement in June. File Image: IOL

CAPE TOWN – It is no longer negotiable that government urgently restructures its policies and procedures on how SOEs are managed, particularly through the independent appointment of competent boards and management.

This is according to the South African Chamber of Commerce and Industry (Sacci), which on Wednesday reported a decline in the Business Confidence Index in July after a marginal improvement in June.

Sacci’s BCI for July declined to 92 index points, 1.3 index points lower than the June 2019 level, and 2.7 index points lower than the July 2018 figure, after it improved marginally by 0.3 index point in June 2019. 

“This is the second-lowest level of the index since January 2019, the lowest being in March at 91.8. The highest BCI of 95.1 was recorded in January,” Sacci said in a statement. 

Nedbank Group chief executive Mike Brown on Tuesday issued a strong warning to the government stating that the country was fast running out of both time and money, and urgently needed structural reforms to stem economic and fiscal deterioration.

According to Sacci the lower BCI comes at a time when there is already a very high expectations of a shift by government to full implementation of policies geared for economic growth, job creation, alleviation of poverty, crime and social injustices among other priorities, after the election of a new government in the May 2019 elections. 

“The high level of optimism that existed immediately after the election of President Cyril Ramaphosa, is being affected by indications that the ruling party is divided on policy, political and factional lines, on the basis that these divisions have a direct impact in government’s efficiency and effectiveness in implementing its policies and managing the fiscus,” said Sacci. “The widely reported poor financial position of state-owned enterprises (SOEs) and municipalities has been and continues to be a huge cause for concern.”

It is SACCI view that the manner in which SOEs and municipalities are led, managed and operated is the primary cause of their problems. The chamber of commerce and industry placed the blame squarely of the government saying all problems started with the government’s own practice of how leadership and management were appointed to run its businesses and municipalities. 

The chamber said the recently released unemployment figures in the second quarter of 2019 was the most telling indicator of the subdued performance of the South African economy. “The decision by the SA Reserve Bank to reduce the benchmark repo rate by 25 basis points, should have a positive impact on aggregate demand that could positively impact on real gross domestic product (GDP).”

Sacci noted that positive monthly effects on the BCI were caused by the stronger weighted rand exchange rate, the volume of retail sales, and a decline in the real predominant bank overdraft rate. 

In July the domestic currency dipped below R14 to the dollar reaching its strongest levels since February.

Sacci said: “Although the real economic activity business climate remained challenging, the financial conditions pertaining to the business climate improved due to exogenous factors such as higher commodity prices and a lower repo-rate.”

The year-on-year and month-on-month performance of especially merchandise import and export volumes made negative contributions to the business climate, according to the chamber. The positive annual change in energy supply was owing to the US-dollar crude oil price that declined by 10 US-dollar over the year to July 2019. 

BUSINESS REPORT ONLINE