Picture: THE HERALD/MIKE HOLMES
Picture: THE HERALD/MIKE HOLMES

The political developments in December have vastly improved the business mood, according to the South African Chamber of Commerce and Industry (Sacci).

The business confidence index (BCI) increased by 1.3 index points in December 2017 to 96.4 following on the improved business mood in November 2017, which increased to 95.1 from 92.9 in October. 

Sacci said in a statement released on Wednesday: "The anticipation for more policy certainty and sustainable-growth-orientated domestic economic policy, global economic growth, and a probable fresh approach towards business and investor challenges should further augment the business mood."

During the ANC elective conference in December, Cyril Ramaphosa who is perceived as business friendly was elected president of the ruling party.

Four of the 13 subindices had positive month-on-month changes, five moved sideways and four were negative. Five of the seven real economic subindices had either neutral or positive month-on-month changes, implying improving activity in the short term.

"As mirrored by the subindices that make up the Sacci BCI, the business mood, and business climate in addition, have been supplementing the hints of improvement in the financial markets and the economy. The latest economic figures confirm these suggestions of improving prospects," said Sacci.

"For the momentum in the business mood to continue, it should be met and augmented by urgent economic policy action," it added.

At the end of November, the GDP figure for the third quarter indicated that SA may see higher growth than anticipated. GDP grew by a more than expected 2% quarter on quarter in the third quarter of 2017.

Last week, however, the Standard Bank purchasing managers index (PMI), which measures the whole economy, indicated that the health of the South African private sector was expected to continue to deteriorate given the weak economic conditions.

The PMI remained in contractionary territory for a fifth consecutive month, dropping slightly to 48.4 in December from 48.8 in November.

Standard Bank economist Thanda Sithole said: "The decline in the PMI is likely to persist in the near term amid deteriorating fiscal outlook and elevated risk of further sovereign ratings downgrades."

He added: "However, further declines in the private sector PMI could potentially be averted should the governing party work tirelessly to restore lost business confidence."

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