Business confidence slips in July and Sacci points finger at political appointees

Business confidence remained under considerable strain in July from the ongoing practice of putting political appointees in charge of municipalities and state-owned enterprises (SOEs), the SA Chamber of Commerce and Industry (Sacci) says.

The government urgently needs to ensure SOEs are managed through independent and competent management, Sacci CEO Alan Mukoki said on Wdnesday, as the business lobby reported that confidence resumed its downward trend in July.

After a slight rise in June, Sacci's business confidence index (BCI) fell to 92 points in July from 93.3. This is the sixth consecutive month the index has remained below the 95.5 points it averaged in 2018.

The Bloomberg consensus had been for business confidence to ease slightly to 93 points in July.

The optimism that followed President Cyril Ramaphosa's election has been eroded by indications that the ANC remains divided along policy, political and factional lines, Sacci said. This was having a direct effect on the government’s efficiency and effectiveness in implementing its policies and managing the fiscus.

“We need to start asking the question ‘do we have a proper selection platforms for non-executive boards on state-owned enterprises?’,” said Mukoki.

Instead of ministerial appointments, SA could possibly instead create a new selection process, similar to how the Judicial Services Commission operates, he said.

The commission conducts rigorous, often gruelling public interviews of judicial candidates, ultimately presenting its recommendations to the presidency.

The poor financial condition of SOEs and SA's municipalities remains a key cause of concern, Sacci said, adding that it was the chamber's view that “the manner in which SOEs and municipalities are led, managed and operated is the primary cause of their problems”.

July saw the IMF downgrade SA's 2019 growth forecast to 0.7% from 1.2% previously, although Sacci noted that the Reserve Bank’s 25 basis-point cut during the month was a positive.

Crippling debt at SA’s state-owned enterprises is raising fears of Moody's Investors Service downgrading SA to junk status, with the agency saying on Tuesday that the government’s recent bailout for Eskom would be insufficient for solving its financial problems and it urgently needed a turnaround strategy.

The government’s options were now being severely limited, Mukoki said, and while the government was “making the right noises” in terms of boosting confidence, little progress was being made. 

“The business confidence index is beginning to tell us there is doubt in people’s minds if any of the government's programmes and projects that are being announced are ultimately going to work,” he said.

Both Ramaphosa and public enterprises minister Pravin Gordhan have previously said efforts are under way to deal with governance problems at SOEs. Gordhan said in July that a white paper on how to unbundle Eskom would be unveiled within weeks.

gernetzkyk@businesslive.co.za