In a landscape marked by economic turbulence, the South African Chamber of Commerce and Industry (SACCI) has reported a modest rebound in its Business Confidence Index (BCI) for September 2024.
Following a decline earlier this year, the BCI reflected a slowly revitalising business climate, albeit shadowed by persistent underlying challenges that define the current economic context.
Releasing the September data yesterday, SACCI indicated that the BCI had seen a decline of 6.9 index points from March to May 2024.
Fortunately, by August the index had bounced back, gaining 3.7 index points, only to slip again to 110.2 in September.
Despite this fluctuation, SACCI’s CEO Alan Mukoki and economist Richard Downing described the year thus far as a period of steady recovery, with the overall average for the first nine months resting at 110.9—up from 109.2 in the same period of 2023.
The report outlined that only three out of 14 sub-indices contributed negatively to the BCI in the short term, while 11 provided a favourable outlook for business.
Factors fostering this positive sentiment included an influx of overseas tourists, increased merchandise export volumes, enhanced manufacturing activity, and a decrease in inflation rates.
However, not all indicators pointed towards optimism.
The SACCI noted concerns over disappointing new vehicle sales, sluggish retail activity, and a decrease in the real value of building plans approved, signalling that more work lies ahead to stabilise and enhance the business ecosystem.
Year-on-year to September 2024, the BCI recorded a notable increase of 2 index points, underpinned by rising overseas tourist figures, soaring global precious metal prices, and stabilising electricity supply, coupled with lower fuel costs—each a critical cornerstone of improved business sentiment.
Nonetheless, SACCI expressed deep concern regarding the performance of local municipalities, with 66 of the nation’s 257 deemed dysfunctional.
Financial mismanagement and inadequate service delivery emerge as pressing issues, with only 30 municipalities considered stable and 161 at significant risk.
SACCI said ensuring a turnaround in these municipal areas remained paramount for the realisation of fixed investments.
Amidst a shifting economic backdrop, SACCI also raised alarms about the potential ramifications of soaring electricity tariffs on price stability.
As inflation remains below the mid-target range, the chamber echoed the South African Reserve Bank’s worries that further hikes in administered prices and excessive wage growth could hinder progress towards economic stability.
The complexity of business confidence was evident in SACCI’s remarks.
“The slow but steady recovery of business confidence bears testimony to the degree of difficulties that marked the business environment and economic performance,” said the Chamber.
SACCI further emphasised the necessity for collaboration between public and private sectors to address these hurdles effectively.
Looking ahead, the chamber remains optimistic about the forthcoming Medium Term Budget Policy Statement (MTBPS 2024), hoping it will confirm a collective effort to address the structural impediments hampering the economy.
A coordinated strategy among government tiers could effectively dispel the current atmosphere of uncertainty hampering business confidence.
North West University Business School economist, Professor Raymond Parsons, echoing the sentiment of SACCI’s findings, stated that mixed economic data results are to be expected at this juncture.
He asserted that while there have been tangible improvements, notably with the newly formed government and enhanced energy security, many challenges remain that need to be tackled to underpin the ongoing economic recovery.
“We must expect economic data to be mixed at this stage. While the advent of the Government of National unity and greater energy security, amongst others, have seen a positive turning point in South Africa's business cycle, there remain key challenges to be addressed to underpin the current economic recovery,” Parsons said.
“These range from modifying the excessive Eskom application for higher tariffs over the next 3 years to the extent to which the Medium-Term Budget on October 30 will further reinforce business confidence.”
BUSINESS REPORT