The South African Chamber of Commerce and Industry (Sacci) Business Confidence Index (BCI) measured 96 in July, up 0.9 index points from the 95.1 index points it reported in June.

This was the second consecutive increase for the index, which improved 3.3 index points in June from the 91.8 index points reported in May. However, business confidence was still 5.8 index points lower than in July 2015.

Sacci said on Monday that the quarterly turnaround might have stemmed the declining tide, leading to further improvements in business confidence.

“There were marginally less impediments in the real business environment in July, compared to June, with five of the seven subindices improving month-on-month,” it said.

The financial climate also improved, with three subindices improving in July, two remaining unchanged and one declining. Sacci noted that the yearly BCI comparison did not indicate any material change in the subdued business climate in the real economy or the tight financial environment of a year ago.
Further, the chamber noted that the main monthly positive contributions to the BCI included the rand exchange rate, merchandise export volumes, real retail sales and the US dollar gold and platinum price, while building plans passed, new vehicle sales and inflation had the largest negative impact in the month under review.

The year-on-year change in the business climate paused in July, with three subindices making positive contributions to the BCI, as in June.

Ten subindices made negative year-on-year contributions in July, with two of the seven real activity subindices and one of the six financial subindices having positive year-on-year impacts.

The foreign-sector subindices in particular had positive year-on-year impacts on the BCI in July, as reflected by merchandise export volumes and the gold and platinum prices. The financial environment continued to restrict the business climate – similar to a year ago when only precious metal prices improved.

South Africa experienced stronger merchandise export trade in June and July, while the rand gained a healthy plus-10% on a weighted rand exchange rate against the US dollar, the British pound and the euro.

Meanwhile, Sacci voiced its concern that the International Monetary Fund and the Reserve Bank had lowered South Africa’s economic growth projections.

“With the probability of a credit ratings downgrade for South Africa in December, caution must be exercised on vulnerable economic issues over the short-to-medium term. A concerted effort will be necessary to avoid even tighter economic conditions in 2017, as such, lower economic growth holds additional repercussions for public finance, unemployment and the real cost of borrowing,” the chamber added.

Apart from a stronger exchange rate and improved merchandise export volumes, investor and business confidence have to improve to propel the economy to higher activity levels.

“This could provide the public sector with the necessary resource base to alleviate the pressure on public finances and ease unemployment,” stated Sacci.