Business confidence remained under pressure in February, with the South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) declining to 93 points, down one point on the 94 recorded in January.

The business climate fundamentals remained weak, as reflected by the critical Sacci BCI subindices, the chamber noted.

The month-on-month decline in the index was the result of real economic activity, as well as the financial environment failing to support a sustained improvement in business confidence, it added.

Seven of the 13 BCI subindices impacted negatively on a monthly basis; however, three subindices – the merchandise export volumes, real retail sales and the weighted average exchange rate of the rand – drove the BCI higher in February.  

Further, Sacci stated that the year-on-year difference of minus 6.5 points in February was greater than the minus 3.1 points yearly difference in January and was a consequence of the decline in the BCI only setting in after February 2012. 

The chamber added that the yearly performance of the BCI subindices was of even greater concern, with ten subindices being negative and only the new vehicle sales, share prices and real borrowing by the private sector subindices making positive contributions.

Finance Minister Pravin Gordhan’s 2013 Budget was a particularly important event in the context of recent militant strikes, mixed policy signals and slow economic growth, Sacci stated.

It was concerned that the substantial trade account deficit for January exposed the vulnerable local economy – and particularly the rand exchange rate – to such developments. 

“With the Budget deficit above 5% of gross domestic product (GDP) and an anticipated deficit on the current account of the balance of payments close to 6% for 2013, a combined twin deficit of more than 11% of GDP is high by global standards.

“The implemented outcomes of the 2013 Budget and the potential improvements in financial discipline and accountability in the broader public sector will determine the extent to which South Africa progresses towards the desired goals of the National Development Plan in the short term. Sound and sustainable public finance management is a key contributor to possible improvements in the business climate,” the chamber noted.