Business Confidence Suffers Setback

The SACCI Business Confidence Index (BCI) for May 2013 was released today at the SACCI Offices in Rosebank, Johannesburg.

The SACCI BCI, which is market-influenced and accounts for economic and other developments that have a bearing on the business mood in South Africa, was influenced both positively and negatively by various developments in May 2013. The BCI for May 2013 points to a depressed business climate at a level of 90.4, which is 1.9 index points lower than in April 2013.

Although the BCI recovered by 1.9 index points in April 2013, there have since been developments in the domestic economy that have adversely impacted some important BCI sub-indices. The annual change in the BCI sub-indices were slightly more encouraging in May 2013 than in April as 7 of the 13 sub-indices improved year-on-year while in April 2013 only 3 sub-indices were positive and 1 neutral.

Although there were 3 financial sub-indices in May 2013 that were positive on a year ago compared to 1 in April 2013, important financial sub-indices like the weighted rand exchange rate, inflation and US dollar precious metal prices impacted strongly on an uncertain financial environment beset by various cost-push factors.

The negative impact on the business climate came mainly from causes exogenous to private business activity but which play a cardinal role in affecting business confidence, economic performance and financial markets.   Socio-political events, including on-going militant labour action, are having a harmful impact on the business mood and commercial and industrial activity levels while also distorting financial market performance.

For SACCI it is disconcerting that major economic sectors that have the ability to create employment growth, are contracting while others are experiencing exceptional cost pressures resulting from rising labour costs and intermediary inputs like fuel, electricity and water prices that are increasing faster than the general price level as measured by the CPI (5.9%) and the PPI (5.4%).

The decline in the SACCI BCI in May 2013 shows that non-economic factors can have a damaging impact on the economy and on the business climate. Ill-disciplined and lawless conduct by economic role players leads to undesirable effects on growth, the rand and unemployment, which could have been avoided. If business confidence is to rise above its current levels of vulnerability, it is essential that economic role players urgently rally around a common vision of sound business values and economic progress.

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 Mr. Richard Downing SACCI Economist and Mr. Neren Rau  SACCI CEO, June 4 2013

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