Business confidence comes off the boil after strong start to the year
Business confidence has moderated slightly from January’s high levels, the South African Chamber of Commerce and Industry (Sacci) says, though it has maintained its positive momentum.
Sacci’s business confidence index (BCI) pulled back slightly — by 0.8 index points — in February, to 98.9.
That follows a greatly improved business mood in January, when business confidence hit its highest level in two years, rising to 99.7 from 96.4 in December.
The BCI increased by 3.4 index points in February compared with February 2017.
Sacci said in its release on Wednesday: “Although the present business confidence contains substantial positive sentiment, investment decisions will soon have to become reality to create sustainable higher economic growth and employment prospects.”
Sacci said that during the World Economic Forum (WEF) meeting in Davos in January, then-deputy president Cyril Ramaphosa had promoted SA as an investment destination, assuring investors of a secure and stable investment environment.
“Many of the policy proposals should thus be targeting concerns of international credit ratings agencies as well as those for potential local and international investors.”
Six of the 13 subindices of the business confidence index fell in February from January’s highs.
The largest positive contributions to the business climate were from lower inflation, increased merchandise import volumes, improved new vehicle sales and increased manufacturing output.
The high real cost of financing and lower merchandise export volumes had a negative effect on the index.
On Monday, the Standard Bank purchasing managers index — which measures the whole economy — also signalled an improvement in the health of the South African private sector for the first time in seven months in February.
The PMI finally breached the 50-point mark, reaching 51.4 from 49 in January, after remaining in contraction for six months running.
Standard Bank economist Thanda Sithole said: “The February outcome supports our view that the improved political backdrop, including intervention in SA’s state-owned entities (SOEs) to restore corporate governance, as well as the Cabinet renewal under President Ramaphosa, should lift sentiment and thereby stimulate the PMI to improve further.”
He added, however, that the sustained optimism would depend on the government addressing policy issues such as land expropriation without compensation and radical economic transformation
On Monday, Finance Minister Nhlanhla Nene said a marked improvement in business confidence would result in higher economic growth.
Gross domestic product (GDP) increased by 1.5% in the fourth quarter of 2017 compared with the year before.
The economy grew 1.3% last year, Stats SA’s data showed on Tuesday — higher than Treasury’s forecasts of 1%.