While South Africa continues to struggle to grow the economy, the South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) remained steady in December, recording only a marginal month-on-month decline of 0.1 index points to 93.8.

Sacci pointed out that the ten-point year-on-year decline of December 2015 had reversed, with a year-on-year increase of 1.6 index points recorded in December 2016. This is the first time since February 2015 that the Sacci BCI improved on a year-on-year basis.

The average BCI in 2016 was 93.5, compared with the average of 100 in 2015 – the base-year for the BCI – and 104.2 in 2014.

During 2016, the BCI recovered reasonably well up to July, when the BCI reached 96, after which it contracted to a low of 90.3 in September. Towards the end of the year, the index had improved slowly and gradually and remained steady. 

Five subindices made positive month-on-month contributions to the BCI in December, while six subindices made negative contributions and two remained unchanged.

Positive monthly contributions to the BCI mainly came from merchandise export and import volumes, the rand exchange rate and the real value of building plans passed.

The dollar price of precious metals, credit to the private sector, real retail sales and share prices made the largest negative month-on-month impacts on the BCI in December.

The year-on-year comparison in December reflects a more restrained business climate with three of the 13 subindices improving year-on-year.

One real activity subindex was positive and two of the six financial subindices made positive impacts on the BCI in December. The rand exchange rate had a notable positive year-on-year effect.

“The IMF, rating agencies, private sector entities and [the National] Treasury have identified areas in the economy that need adjustment. The leeway in maintaining the investment status by reputable ratings agencies in December, afforded South Africa an opportunity to address matters that seriously restrain the economy,” Sacci said in a statement issued on Wednesday.

Apart from not creating wealth and feeding unemployment, the consequences of such restraints for public sector and household debt, the erosion of savings, the degrading of capital stock and inappropriate investment levels would have continued to seriously hamper future economic growth.

The chamber stated that while there were looming global and domestic uncertainties over political, economic and institutional arrangements, these challenges could provide new opportunities for economies and for countries. “This could loosen up the momentum for improved business confidence,” it said.

Sacci further noted that while 2016 was a difficult year, which saw the BCI reach historic lows, business confidence also showed some resilience despite these uncertainties.