Business confidence at lowest level in nearly a year
After a slight boost in July, business confidence has fallen to its lowest level in almost a year.
The Sacci business confidence index (BCI) dropped 4.2 index points in August to 90.5 compared to 94.7 in July. However, it remained 0.9 index points above the 89.6 of August 2017.
"The positive mood that prevailed at the beginning of 2018 has been overtaken by uncertainty and events that weigh on the economic prospects for SA. This also taints SA as a sought-after investment destination," the South African Chamber of Commerce and Industry (Sacci) said in a statement on Wednesday.
The Sacci index is a measure of business activity rather than a sentiment survey in that it is compiled from a variety of activity indicators, including energy production, trade figures and financial market performance.
Only three of the 13 subindices of the composite BCI improved in August from July, five were unchanged and five turned negative.
The business climate was shaken by uncertainty in both real economic activity and financial conditions. The largest negative month-on-month effects were by merchandise export volumes, the weaker rand exchange rate and higher inflation.
Sacci said the trajectory of business confidence would depend on the medium-term budget review at the end of October.
"The finance minister will have to convince investors that the government can maintain spending discipline in the run-up to the 2019 elections and enhance economic growth. It has become imperative to establish economic performance if the business and investor climate are to be restored and improved," Sacci said.
On Tuesday, the business confidence index compiled by RMB/BER also showed that sentiment fell to 38 in the third quarter from 39 in the second quarter on the back of policy uncertainty.
"The underlying South African business landscape continues to weaken, with more sectors showing signs of strain. While confidence hasn’t (yet) fallen to the levels observed during the previous (and severe) recession of 2009, we remain deeply concerned about the prospects," RMB chief economist Ettienne Le Roux said.