The South African Chamber of Commerce and Industry (Sacci) said on Thursday that business confidence ticked up 3% in 2010, but a lot still needed to be done to significantly improve on current levels.

Sacci economist Richard Downing said at a media briefing that South Africa still had a “battle on its hands” if it wanted to improve business confidence.

The chamber's economic forecast survey for 2011 showed that only 14% of business expected economic growth to improve in the new year, while 39% thought that it would be worse.

Some of the significant challenges included the growing lack of skilled labour, increasing pressure on business owing to the country's high unemployment numbers, public sector capacity and service delivery.

Business also raised concerns around the country's education system and the impact that it would have on the economy, Sacci CEO Neren Rau added.

In November, Sacci's Business Confidence Index moved ahead by 1,1 points to 87 points compared with the previous month. Rau noted that even though this was a positive move, it was somewhat concerning if one took into account that November was traditionally a peak trading month for business.

Downing pointed out that three significant developments in the course of November had an important bearing on economic prospects for the South African economy.

“The Ireland debt situation indicated that the economic recovery of Europe might again be slowed down or even be in jeopordy, while the US has also been speaking about introducing a third stimulus package. Seeing that these are still two our biggest trading zones, such uncertainties could make for bumpy business confidence in South Africa.

“Domestically, the continued lowering of the repo rate and the growth enhancement plan could also have important implications for business and the economy.”

Sacci said that business was sceptical of the more centralist approach that was implied by Economic Development Minister Ebrahim Patel’s New Growth Path, which aims to create five-million jobs over the next ten years.

The Sacci survey for 2011 showed that 54% of companies had poor confidence in the national political leadership.

“Business is fully cognisant of the significance of economic growth and job creation in South Africa, but is of the view that the focus of effort should directed at an enabling business environment.

“A stronger interventionist approach in addressing national economic challenges will have serious consequences for the functioning of the country’s economy, adversely affect investor and business confidence and compromise the economy's ability to create sustainable jobs,” said Rau.

He said that Sacci was currently in discussions with the Minister to address certain contradictions in the new plan, and to state its case for the benefits of free markets and enterprise.

“There are a number of contradictions mentioned in the New Growth Path, such as wanting to improve and increase the number of skilled artisans and engineers, but then placing a cap on salaries.

“Such extreme interventions are only needed if markets are dysfunctional, and we do not believe that government has made a strong case for intervention,” said Rau.

Downing said that even the Chinese had started moving away from State control to more private intiatives to further stimulate growth.

Meanwhile, despite the recent lowering of the repo rate, the real prime overdraft rate has been on the increase since June 2008. “Over this period, household debt to disposable income remained high and real consumption expenditure by households remained under pressure, as increases in the tariffs of local government public utilities further placed a lid on any intended relief from lower interest rates,” said Downing.

Sacci noted that the increased collective costs and taxes were also taking its toll on small and medium-sized enterprises (SMEs), that were the drivers of a country’s economy.

Downing said that higher electricity rates, the cost of about 70c/km on toll roads becoming operational in the second quarter of next year, additional administrative costs, and expected increases in water tariffs were stifling the growth of SMEs in the country.

“Business is increasingly paying more with limited resources, but getting less. This is not sustainable in the long run,” concluded Downing.