The South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) has gained some ground, reaching 93.4 in November.
The BCI had bottomed out at 70.1 in May, reflecting the impact of the lockdown measures on the business climate.
The sharp initial decline in the BCI owing to Covid-19 and the radical lockdown intervention was followed by a reactionary upward spike in June, but then gradually recovered to a more stable trajectory – 85.7 index points in September and 92 in October.
The BCI has, overall, been declining from a high of 120 index points recorded at the start of 2011.
Sacci says that although the November reading of the BCI is 0.7 index points better than the level of 92.7 recorded in November 2019, it still reflects a business climate that is plagued by poor economic performance, recessionary conditions, high unemployment and fiscal unsustainability.
The chamber says the low inflation, recovery in certain trade categories and the reset of international trade and commodity prices, are among the major developments that contributed to an improved business climate currently.
Sacci says the medium-term annualised recovery in the business climate needs to be strengthened.
The chamber believes South Africa needs policy decisions that restore foreign and local investor confidence, economic growth and employment creation.
“There are signs that merchandise export and global commodity prices should benefit the business climate in 2021. It remains important to highlight South Africa as a prime tourist destination to attract foreign exchange earnings from this sector.
“The weaker rand exchange rate, loss of disposable household income and the high import propensity of durable spending remain medium-term challenging areas. Easier financial conditions than a year ago due to lower inflation and interest rates contributed to the more positive medium-term business climate at this stage,” Sacci notes.
Various institutions, including international credit rating agencies, the International Monetary Fund, the World Bank, the National Treasury and the South African Reserve Bank have expressed their concern about the economic effect of not only the Covid-19 pandemic, and the local and global radical governmental interventions it caused, but also the necessity of rectifying economic policy matters to place the economy in a better structural position.
“It has become clear that structural reform is necessary in South Africa. Finding solutions to the health and economic effect of Covid-19 call for expedited credible economic policy changes to enhance economic performance and place economic growth on a new trajectory,” the chamber says.