Business confidence languishes as SA faces difficult fiscal position

Business confidence, measured by the SA Chamber of Commerce and Industry (Sacci), registered a small month-on-month decline in October, driven by lower imports and exports, rand depreciation and load-shedding.  

The Sacci business confidence index (BCI) measured 91.7 in October down 0.7 points from September’s reading. The index remains down 4.1 points on October 2018’s reading of 95.8.

Confidence levels appear to have hit a plateau, the chamber said in a statement on Thursday, at a time when policymakers have “little manoeuvring space” to set the economy on course.

October’s medium-term budget policy statement (MTBPS) — which showed that economic growth is expected to reach only 0.5% in 2019, along with a sharp deterioration in government finances — saw ratings agency Moody’s Investors Service drop its outlook on SA government debt to negative.

“It is doubtful whether the current fiscal situation could be contained and reversed to inspire growth and employment,” Sacci said in its statement.

“Credit ratings agencies, lenders and investors are reluctant to make decisions in an uncertain environment. The need for economic growth and reducing unemployment must take centre stage,” it said.

According to the chamber, the monthly declines were driven by decreased merchandise export and import volumes, rand depreciation and disrupted energy supply.

The deeper annual declines were due to “notable” year-on-year decreases in merchandise export and import volumes, a decline in the real value of building plans passed, lower all share prices on the JSE and decreased real retail sales.

The reading came in marginally below expectations of 92, according to a Bloomberg poll of three economists.

donnellyl@businesslive.co.za