NEWS & ANALYSIS

Economy faces serious challenges – SACCI

Chamber says these are now deeply entrenched, and need to be handled with urgency and care

Cautionary Business Mode 

6 March 2019

SACCI released the Business Confidence Index (BCI) for February 2019 at its offices in Illovo, Johannesburg.

SACCI’s Business Confidence Index (BCI) declined in February 2019 to 93.4. This is 1.7 index points lower than in January 2019 and 5.5 points below the February 2018 BCI level of 98.9. The level of the BCI during the first few months of 2018 was to a large extend driven by expectations of an improved business climate.

Business confidence, however, deteriorated throughout 2018 as the economy and the business climate came to terms and realised that the structural challenges in the economy lie beyond short-term remedies.

Five of the thirteen sub-indices of the SACCI BCI improved on their January 2019 readings, five declined and three were unchanged. The main positive month-on-month effects on the BCI were increased merchandise export volumes, higher share prices on the JSE, and more real credit extended to the private sector. In February 2019 the year-on-year decline in the BCI exceeded the decline of January 2019. Two of the seven real-activity indices made positive year-on-year impacts on the BCI in February 2019, while only the real cost of finance (by default) had a positive year-on-year effect on the business climate compared to a year ago. Four of the six financial sub-indices had negative year-on-year impacts on the business climate with real private sector credit unchanged on a year ago.

Domestically, the South African economy faces serious challenges. These challenges are now deeply entrenched, and need to be handle with urgency and care. The upcoming elections do not only serve as an opportunity to establish credible representation, but also provide a platform to come to a rational and sustainable economic policy framework that carries the support of the business community.

Public sector activities and events like SONA and the Budgets are important for setting the economy on a course for growth, create a conducive business climate, and promote a positive investor outlook. The economy is emerging from a difficult period that affected business confidence, policy uncertainty and performance. It has led to a substantial increase in unemployment levels.

It is against this background, that the present economic performance, the SONA, the Budget, and business confidence should be appraised. Business confidence will remain under pressure and success will hinge on implementing, building and improving on these baselines.

Issued by Alan Mukoki, CEO, SACCI, 6 March 2019