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Elusive Business Confidence

SACCI’s BCI (2015 = 100) shed 0.7 index points in October 2019 to measure 91.7 compared to 92.4 in September 2019. After dipping below the 90-index level in August 2019, the BCI managed to stay above the 90-index level in October. The BCI is 4.1 points below last year’s October level of 95.8.

Between September and October 2019, five sub-indices improved, six weakened, and two remained even. Particular relative positive monthly contributions came from increased new vehicle sales, lower consumer inflation, and real retail sales. Substantial relative negative impacts on the BCI emanated from decreased merchandise export and import volumes, to a lesser degree from the rand exchange rate depreciation, and disrupted energy supply.

The annual decline of 4.1 index points between October 2019 and September 2018 was mainly 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.

Although emerging market and developing economies will experience slower growth of 3.9% in 2019, growth is projected to increase to 4.6% in 2020 and to 4.8% by 2024. For Sub-Sahara Africa economic growth will remain at 3.2% in 2019, rise to 3.6% in 2020 and increase to 4.8% by 2024.

Apart from the Minister of finance painting a sobering  picture about the economy which is expected to grow by only ½ a percent in 2019, the fiscal situation appears to be hard to contain within sustainable economic parameters. A number of public finance features emerged from the MTBPS that remain of concern.

It is doubtful whether the current fiscal situation could be contained and reversed to inspire growth and employment. However, the Minister provided a straightforward assessment of the growing fiscal and economic difficulties. Of special concern is the expenditure side with certain items like debt levels, debt servicing and recurrent expenditure items that appear not to be containable. There seems to be obstacles to what the Minister would like to achieve. The Moody’s rating agency latest negative outlook puts additional pressure on the sovereign credit rating which could generally dampen the investment prospects for South Africa in the foreseeable future. The February 2020 Budget will be a crucial turning point in this regard.

Business confidence appears to remains at a plateau while policymakers have little manoeuvring space to set the economy on course. Credit rating 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. A cue from the victorious Springbok rugby team could perhaps serve as guide to what needs to be done – Together We Can Make It Happen – if the urgency and the winning game plan as proposed could be followed!       

For more information, contact:

Alan Mukoki                             SACCI CEO                               082 551 1159

Richard Downing                      SACCI Economist                      082 822 5566

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