Photo by: Duane Daws
After rallying to 87.9 in July and dipping to 84.3 in August, the South African Chamber of Commerce and Industry’s (Sacci’s) business confidence index (BCI) lost another 2.7 index points in September to hit 81.6, dropping to its lowest level since July 1993 and demonstrating stubborn domestic underperformance and prevailing global economic uncertainty.
The chamber likened September’s regression to a 22-year low to the intensity and pace of declining business confidence last seen during the onset and deepening of the global financial crisis in 2007/8.
The September BCI was, worryingly, also a hefty 40.3 points lower than the all-time peak of 121.9 recorded in December 2006, Sacci economist Richard Downing told the media at the release of the results on Tuesday.
“Things are not going well. This is not good news and we need to look at the reasons behind it. It can be somewhat attributed to industry cycle movements cutting below the long-term trend . . . [but] the bottoming out of the BCI calls for real action in terms of policy to assure investors and consumers.
“We must do something extraordinary. It’s not business as usual,” he commented.
The comparative year-on-year business mood worsened markedly in September, slipping well below the BCI of 74 seen in the same month of the prior year, despite import volumes, retail and manufacturing improving year-on-year.
Month-on-month changes in the index’s subindices in September varied, with four activity indices and one financial subindex remaining positive in September, while three financial and one activity index remained neutral. The remaining subindices worsened month-on-month, read the report.
“With inflation marginally lower than a year ago, the financial climate remains tight compared with a year ago with rand and precious metal price instability, as well as hesitation, marking the financial environment,” said Downing.
The chamber, meanwhile, noted with concern that, against the global economic backdrop, the prospects for Africa – and those countries on the continent dependent on commodity export volumes and dollar prices – could become “desperate”.
“It is particularly worrying that Africa’s external debt levels are rising. In its latest World Economic Outlook analysis, the International Monetary Fund noted that the weak commodity price outlook was estimated to subtract almost one percentage point a year from the average rate of economic growth in commodity exporters between 2015 and 2017 compared with 2012 to 2014,” Sacci held.
While the South African economy remained more diversified than most economies in Africa, with mining playing a notably smaller role in its gross domestic product, the local economy was already experiencing slower growth and any commodity price dip was likely to have significant consequences for the balance of payments, public sector entities, public finance and employment.
Encouragingly, however, Downing advanced that there was a possibility that business confidence had reached a turning point from which it could now begin to recover.
“It can still go lower, but I think it’s hit its low point,” he advised.