Business confidence in South Africa has risen to a four-month high as the rebound in the vehicle sales and the recovery in the tourism industries have instilled hope for the economy.
The South African Chamber of Commerce and Industry (Sacci) said yesterday that the Business Confidence Index (BCI) recorded 110.3 index points in July, from 108.5 index points in June.
This was the highest reading since March, helped by an increase in trade volumes and new vehicle sales, with the BCI rising 1.8 and 1.6 index points higher from June and May, respectively.
Sacci said that increased merchandise export and import volumes, and more new vehicles sold despite extremely high fuel prices, made positive contributions to the business climate in the short term in July.
New vehicle sales grew 30.9 percent from last year’s low base to 43 593 year-on-year in July, the fourth consecutive month of sales growth since the market’s slow April performance.
The BCI for June and July indicated that the negative medium-term business sentiment of May was replaced by positive developments if compared to the same period last year.
Sacci said what had turned around confidence was the marked recovery to inward tourism, while increased new vehicle sales pointed towards medium-term investment.
Real credit extension to the private sector was also more readily available notwithstanding higher debt servicing costs as the SA Reserve Bank hiked interest rates by 75 basis points to 5.5 percent, taking the prime lending rate to 9 percent per annum.
“The July 2022 BCI number indicates the business climate is gradually returning to normality,” Sacci said.
However, Sacci pointed to a number of economic impediments against growth in South Africa.
Sacci said Eskom’s electricity generation shortages in July were estimated to have caused significant costs to the economy, with more than R4 billion lost from the gross domestic product per day during Stage 6 of load shedding.
According to the International Monetary Fund, South Africa could experience growth of 2.3 percent in 2022 but structural impediments could see slow growth slowing to 1.4 percent in 2023.
Sacci economist Richard Downing also said higher inflation, a volatile rand exchange rate and higher interest rates continued to weigh negatively on the local business environment.
Downing said the most negative year-on-year impacts were from the financial environment, namely rising inflation, increased real financing costs and a weaker and volatile rand.
“The present business climate is notably affected by rising inflation (worldwide) and by distortions of global supply chains and commodity markets,” Downing said.
“South Africa’s economic situation prevailed, with business confidence in a ‘holding’ position at present.”
BUSINESS REPORT