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Political pretence affects business climate

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Political pretence affects business climate

Political pretence affects business climate

11th June 2024

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/ MEDIA STATEMENT / The content on this page is not written by Polity.org.za, but is supplied by third parties. This content does not constitute news reporting by Polity.org.za.

The advent and outcome of the national and provincial elections near the end of May 2024 had a notable effect on business confidence during April and May 2024. The SACCI’s Business Confidence Index (BCI) dipped by 5.8 points in April 2024 to 108.9, and further to 107.8 in May 2024 – a decline of 6.9 points over the two months. The formation of the new government, given the election results, will largely determine the future course of business confidence.

In the short-term (month-to-month), three sub-indices negatively impacted the business climate in May 2024, outweighing the three neutral and eight minor positive effects of the other sub-indices. The decrease in overseas tourists and the decline in merchandise import volumes particularly weighed on the BCI in May, while the main but modest positive impacts came from merchandise export volumes and new vehicle sales.

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Over the year to May 2024, the SACCI BCI increased by 0.9 points to 107.8 from 106.9 in May 2023. Inward tourism and the improved rand exchange rate had the largest positive year-on-year impact on the SACCI BCI in May 2024. Positive effects also came from the higher global price of precious metals and lower inflation. The almost unchanged year-on-year SACCI BCI suggests a probable regressive business climate due to possible unwarranted political developments. Political developments are of special concern given their potential effect on economic policy and the business climate.

SACCI notes with concern that real economic growth slipped to below 1% at 0.5% year-on-year in the 1st quarter of 2024, after measuring 1.4% year-on-year in the 4th quarter of 2023. The primary sector output dipped by 1.7% year-on-year in the 1st quarter of 2024; the secondary sector output declined by 1.4% year-on-year, but the tertiary sector output increased by 1.1% year-on-year.

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The recent parliamentary and provincial elections had an insightful outcome, implying a change in the political guard. This adjustment could have unwarranted and unintended consequences for the economy and the well-being of South African citizens. Political stability and policy certainty will be fundamental assurances that drive business and investor sentiment.

South Africa has an opportunity and duty to set the economy on the road to recovery through responsible and accountable governance. The public and private sectors, as well as citizens, should exercise their respective duties and abilities in line with the constitution and sound economic values and perspectives. The political deviousness of parties during the election process should give way to pragmatism and reality that serve future economic improvement, performance, prosperity, and inclusiveness.

 

Issued by SACCI

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