Business confidence declined in September after a temporary uptick the previous month, the South African Chamber of Commerce and Industry (Sacci) reported on Wednesday.

The business confidence index (BCI) retreated by 3.3 index points to 91.7 in September, from 95 points in August. The BCI was 6.7 points below its level of September last year.

Sacci warned that labour relations in especially the mining sector could cause further damage to an already depressed business mood. “The illegal mining strikes raised investors’ sensitivity to South Africa’s unresolved challenges in the labour market.”

The organisation added that business confidence could change from “uncertain” to “unpredictable” if domestic disorder was not timeously resolved.

UK investment analyst firm Fairfax said the ongoing debate about wages needed action from government, warning that the country’s mining sector could become “uninvestable”.

Sacci also said unresolved fiscal issues and a lack of global economic growth were plaguing business and investor confidence.

The slight improvements in the BCI towards the end of 2011 and early 2012, when it stood at 99 points, were followed by a marked deterioration of 2.6 points in the second quarter and 1.5 points in the third quarter.

“The slight optimism in business confidence that prevailed until recently gave way to pessimism as a lack of direction towards sound policy and implementation are impacting the fundamentals of the South African economy."

Only three subindices were positive on a month-on-month basis compared to six in August, while both the financial and real economic subindices fared worse in September compared with the previous month.

“On an year-on-year basis, eleven of the thirteen subindices declined in September and only two were positive. This is a dramatic turnaround on the situation in August, when nine subindices made a positive contribution to the business climate.”

Sacci noted with concern the most recent downgrade of the South African government bonds by ratings agency Moody’s and South Africa’s loss of two positions in the 2012/13 World Economic Forum (WEF) competitiveness rankings to 52 from 50 out of 144 countries in the previoous year.

In the WEF report, released during September, South Africa is rated in the category of effiency-driven economies, in other words where countries had to begin developing more efficient production proceses and increase product quality because wages had risen and prices might not be further increased.

“Unfortunately, labour incidents in South Africa will not be helpful in enhancing either these prospects, global competitiveness or South Africa’s rating amongst investors,” Sacci said.

In the report, South Africa’s worst-performing competitiveness areas were health, primary education and labour markets, while financial markets and market size help the country’s competitiveness strength.