Business confidence would remain tough for the remainder of the year, only improving towards the end of 2009, South African Chamber of Commerce and Industry (Sacci) economist Richard Downing said on Tuesday.
Sacci's Business Confidence Index (BCI) for December had dropped to 83,8 points, which was the lowest figure for 2008. Business confidence was also at levels last seen in 2003.
Downing commented that the BCI had shown a brief improvement of 2,5 points to 86,7 points in November, before showing a "steeper-than-expected" drop.
He noted that seven of the 13 indices of the BCI had made positive contributions to the index, while one had remained neutral.
The manufacturing, exports, imports, construction of buildings and the rand exchange rate indices had, however, made negative contributions.
Further, he said that the indices that had made positive contributions had only shown low levels of improvement.
The economist expected the majority of the indices to move sideways in 2009, although some could show slight improvements.
Sacci said in a statement that constrained household expenditure, the balance of payments imbalances, the need for continued net financial inflows, lower inflation and commodity prices, limited available fiscal options and restrained economic activity, to be of concern to business in the year ahead.
Meanwhile, Downing asserted that the largest contributors to the decline in business confidence in 2008 had been the cyclical downturn experienced by all economies at some point, the US subprime crisis, which had lead to a financial banking, and eventually a credit crisis, and the electricity constraints in South Africa.
He noted that the electricity constraints could also constrain economic growth in the country for some time.
Sacci's BCI for December had declined to 84,9 points in the fourth quarter of 2008, compared with 91,1 points in the third quarter of the year. This was also a decline from the 95,8 points registered in the fourth quarter of 2007.