The South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) for July declined by 1.3 index points month-on-month to 92.

The BCI was also lower than the 94.7 index points recorded for July 2018.

The July 2019 figure is the second-lowest level of the index since January, the lowest being March at 91.8. The highest BCI of 95.1 was recorded in January. 

Sacci noted positive monthly effects on the BCI in July were the stronger weighted rand exchange rate, the volume of retail sales and a decline in the real predominant bank overdraft rate.

“Although the real economic activity business climate remained challenging, the financial conditions pertaining to the business climate improved, owing to exogenous factors like higher commodity prices and a lower repo rate.

“The year-on-year and month-on-month performance of especially merchandise import and export volumes made negative contributions to the business climate,” said Sacci.  

Sacci stated that the unemployment figures released in the second quarter were the most telling indicator of the subdued performance of the South African economy.

South Africa’s official unemployment rate increased to 29% in the second quarter, its highest level in 11 years.

However, the decision by the South African Reserve Bank to reduce the benchmark repo rate by 25 basis points, should have a positive impact on aggregate demand that could positively impact on real gross domestic product, Sacci noted.

The lower BCI comes at a time when there is already a high expectation of a shift by government to full implementation of policies geared for economic growth, job creation, alleviation of poverty, crime and social injustices among other priorities, after the election of a new government following the May elections.

“The high level of optimism that existed immediately after the election of President Cyril Ramaphosa, is being affected by indications that the ruling party is divided on policy, political and factional lines, on the basis that these divisions have a direct impact in government’s efficiency and effectiveness in implementing its policies and managing the fiscus.

“The widely reported poor financial position of State-owned enterprises (SOEs) and municipalities has been and continues to be a huge cause for concern,” Sacci explained.

Sacci believes the manner in which SOEs and municipalities are led, managed and operated is the primary cause of their problems.

“It is no longer negotiable that government urgently restructures its policies and procedures on how SOEs are managed, particularly through the independent appointment of competent boards and management.”