Business confidence declines

SACCI today announced that the SACCI Business Confidence Index (BCI) for September 2015 contracted to 81.6 in September 2015. The SACCI BCI has declined by 11.2 points since February 2015 (so far the peak in 2015) while the BCI is 7.6 index points lower than in September 2014.

SACCI noted with concern that against the global economic backdrop, the prospects for Africa, and notably those heavily dependent on commodity export volumes and US-dollar prices, might become desperate.  It is particularly worrying that Africa’s external debt levels are rising. The IMF in its latest World Economic Outlook (WEO) analysis remarks that - “The weak commodity price outlook is estimated to subtract almost 1 percentage point annually from the average rate of economic growth in commodity exporters over 2015–17 as compared with 2012–14.”

Although the South African economy is more diversified than most economies in Africa with mining (commodities) notably playing a lesser role, the RSA economy already experiences slow growth of below 2%. A further decline of 1 percentage point will have serious consequences for the Balance of Payment, public sector entities, public finance and employment that are already under strain.

The deterioration in business confidence in 2015 gained momentum and resembles the intensity and pace that marked the decline of the BCI in 2007/08. With 2010 base year at 100, the September 2015 BCI level is 40.3 points lower than the all-time peak of 121.9 recorded in December 2006. September 2015 BCI is the lowest level recorded since July 1993 and is a 22 year low.

Month-on-month changes in the sub-indices of the SACCI BCI were varied in September 2015 with four activity indices and one financial sub-index positive, while three financial and one activity index were neutral. The other sub-indices were worse than in August 2015. The comparative year-on-year business mood worsened markedly in September 2015 and the SACCI BCI dipped well below the BCI for September 2014.  Import volumes, retail and manufacturing, however, improved on last year.  With inflation marginally lower than a year ago, the financial climate remains tight compared to a year ago with instability (rand and precious metals) and hesitation marking the financial environment. 

During SACCI’s Annual Convention held during September 2015, important motions were discussed. Essential issues were a Bill of Rights for Entrepreneurs; a National Minimum Wage; the Energy Crisis and the Failure of SETAs.  These critical issues must be addressed in order for business to function properly.  Although the economy and the business climate may set an environment that is more conducive to doing business, the micro business environment is critical to enable particularly small and medium size business to take advantage of opportunities in the global economy should theywish.

For a full background to this month’s SACCI BCI see the Economic Commentary in the BCI report on www.sacci.org.za.