The Business Confidence Index (BCI) of the South African Chamber of Commerce and Industry (Sacci) dipped to 97.1 in January, the lowest level since May 2010, when the BCI registered 96.7.

The BCI briefly increased by 1.7 points in December, to 99.1. The January 2012 BCI is six index points below that of January 2011.

The decline in the BCI between December and January was the result of six of the subindices being negative in January, compared with only three subindices reading negative in December. The financial environment was supportive of positive business sentiment, with five of the six financial subindices being either positive or neutral.

“Only two of the seven subindices in the real sphere of the economy had a positive impact on the BCI between January and December,” Sacci said in a statement.

On a yearly basis, fewer subindices were negative, although the subindices reflecting the financial environment were less favourable than in December. The impact on the BCI from inflation, share prices and the exchange rate of the rand, however, could be more positive in 2012.

“The real economy may experience more challenging times ahead as the low-growth scenario in 2012 would impact negatively on real economic activity,” Sacci cautioned.

The chamber said that a number of challenges cloud the economic and business outlook for the year, including lower economic growth, unemployment, higher inflation and weak municipal service delivery.

Addressing and managing these issues would have a profound effect on the business environment and mood during the year.

“The impending State of the National address and national Budget announcement provide an opportunity to bring about improvements. Both should promote policy consistency in the public sector, commitment and coherency in all government spheres, and lead to enhancements in the business environment to promote a credible and sustainable economic growth path,” Sacci said.

The private sector would have to be an integral component of a turnaround process.

Sacci’s BCI report pointed to some domestic sectors finding it difficult to return to long-term upward growth trends or to gain momentum. This negatively influences business confidence.

“Key activity indicators within the BCI such as share prices and building construction are still below the longer-term growth trend while the other activities remain relatively flat,” the report stated.

The theme of this year’s World Economic Forum meeting in Davos, Switzerland, ‘The Great Transformation: Shaping New Models’, addressed the need for reforming capitalism in its current form. “At this juncture, the global economy is in dire need of growth, employment, leadership and innovation to sustain and build the economic system,” Sacci’s report said.
 

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