Business confidence this year to July is slightly higher than last year, but the overall level remains subdued, and has been stagnant over four months, the Sacci Business Confidence Index (BCI) showed yesterday.
“This environment hinders improved longer-term prospects for the economy, resulting in limited fixed investment and inadequate conditions for robust economic growth and job creation. Additionally, the global economic environment is not favourable for South Africa as an open economy and investment destination, making it challenging to attract much-needed foreign capital and investment,” Sacci said.
The South African Chamber of Commerce and Industry (Sacci) BCI was 106.9 in May 2023, 1.9 index points higher than in June, but then declined by 1.5 index points again in July to reach 107.3.
It had peaked at 117.3 in December 2022, but fell after that due to electricity supply shortages, the impact on economic activity, and the conflict in Ukraine affecting commodity prices. Since April 2023, the index has been hovering around 107.
The BCI in July 2023 was three index points lower than in July 2022. The average BCI in the first 7 months of 2023 is 0.7 index points higher than the same period period in 2022.
“Despite being at lower levels, the BCI showed signs of stabilisation,” Sacci said yesterday.
Positive contributions were observed from increased inward tourism numbers, higher merchandise import volumes (especially diesel fuel), more new vehicle sales, and higher share prices.
However, negative impacts on the BCI in July were from lower merchandise export volumes, higher real financing costs (resulting from lower inflation), a weakening rand against major trading currencies due to unpredictability, and a decline in the real value of building plans passed.
The International Monetary Fund’s updated outlook indicated global economic growth would decline to 3% in 2023 and 2024 from 3.5% in 2022 , Sacci said.
South Africa’s headline inflation fell below the SA Reserve Bank's upper target range of 6% in July, prompting the Reserve Bank to maintain the repo rate at its recent Monetary Policy Committee meeting.
Producer price inflation (PPI) also decreased to 4.8%, and intermediary output prices rose by only 2.4% year on year, indicating a potential easing of the inflationary process.
As a result, a modest interest rate policy might persist, Sacci said. Lower interest rates usually have a positive impact on business confidence.
BUSINESS REPORT