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Business confidence dips again in August

Business confidence dips again in August

3rd September 2015

By: Megan van Wyngaardt
Creamer Media Contributing Editor Online

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Domestic economic conditions and financial market nervousness, as well as global financial market turmoil and economic uncertainty, have led to a fall in the South African Chamber of Commerce and Industry (Sacci) Business Confidence Index (BCI) to 84.3 in August, compared with 87.9 in July and 84.6 in June.

The BCI had declined by 8.5 points since February.

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“The intensity and pace of the deterioration in business confidence this year is much faster than in 2014. Notwithstanding the BCI bouncing back in July, it appears that business confidence in August confirms the declining trend for, at least, the short term,” Sacci said in a statement.

Although physical business activities were slightly better in August than in July, the financial situation remained negative to uncertain compared with July.

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A notable deterioration occurred with export volumes and the weighted rand exchange rate. The uninspiring comparative year-on-year business mood in July worsened in August and the BCI dipped well below the BCI for August 2014.

The present slow economic growth of 1.2% year-on-year in South Africa for the second quarter was of concern to the chamber.

“Although the rand prices of commodities are holding up owing to the weaker rand, the earnings of foreign exchange from this source owing to price and volumes are putting the economy and commodity-based businesses under severe pressure in South Africa,” it said.

Further, it highlighted that the rand was “suffocating” on the currency markets as a result of local uncertainty about the economy, the current account deficit and capital outflows and volatility.

“Apart from the exchange rate, inflation comes under pressure from inefficiencies in the provision of utility services, as well as wage claims well in excess of inflation. The public sector finds it difficult on a broad front with tax income and revenue below expectations.

“[We are] worried that these circumstances suggest that the South African economy is heading for even more difficulties over the short to medium term,” Sacci stated.

It added that the volatile and lower commodity prices, together with unpredictable financial markets, contributed to the uneasiness.

“Adding an uncertain local economic policy climate perpetuates the underperforming economy and dwindling local business confidence – already at historic lows.”

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