Uncertain Business Climate
3 September 2015
SACCI today released the SACCI Business Confidence Index (BCI) for August 2015 at their Offices in Rosebank, Johannesburg.
Business confidence suffered a setback in August 2015 due to subdued domestic economic performance and financial market nervousness as well as global financial market turmoil and economic uncertainty. These circumstances caused the SACCI Business Confidence Index (BCI) to retract to an even lower level than in June 2015. After increasing to 87.9 in July 2015 from 84.6 in June 2015, the SACCI BCI registered 84.3 in August 2015.
The SACCI BCI has declined by 8.5 points since February 2015 (thus far the peak in 2015) while the BCI declined by only 4 index points from the highest to the lowest level in 2014. The intensity and pace of the deterioration in business confidence in 2015 is much faster than in 2014. Notwithstanding the BCI bouncing back in July 2015, it appears that business confidence in August confirms the declining trend for at least the short-term.
Although physical business activities were slightly better in August than in July, the financial situation remained negative to uncertain compared to July 2015. A notable deterioration occurred with export volumes (opposite happened in July) and the weighted rand exchange rate. The uninspiring comparative year-on-year business mood in July 2015 worsened in August 2015 and the BCI dipped well below the BCI for August 2014.
The present slow growth of 1.2% year-on-year in South Africa for the 2nd quarter of 2015 concerns SACCI. Although the rand prices of commodities are holding up due to the weaker rand, the earnings of foreign exchange from this source due to price and volumes are putting the economy and commodity based businesses under severe pressure in South Africa.
The rand has been suffocating on the currency markets due to local uncertainty about the economy, the current account deficit and capital outflows and volatility. Apart from the exchange rate, inflation comes under pressure from inefficiencies in the provision of utility services as well as wage claims well in excess of inflation. The public sector finds it difficult on a broad front with tax income and revenue below expectations. SACCI is worried that these circumstances suggest that the South African economy is heading for even more difficulties over the short to medium-term.
The volatile and lower commodity prices together with unpredictable financial markets, contribute to the uneasiness. Adding an uncertain local economic policy climate perpetuates the underperforming economy and dwindling local business confidence – already down at historic lows.
For a full background to this month’s SACCI BCI see the Economic Commentary in the BCI report on www.sacci.org.za.
Statement issued by Richard Downing, Chamber of Commerce and Industry economist, 3 September 2015
