Trade conditions in South Africa are expected to gradually improve from a depressed territory despite subdued economic performance, after a notable surge in trade expectations as a result of the Government of National Unity (GNU).
The SA Chamber of Commerce and Industry (Sacci) said yesterday that trade prospects particularly benefited during July, as reflected by the Trade Conditions Survey, with the Trade Expectations Index (TEI) increasing by 11 index points to 66 – a level last recorded at the beginning of 2006.
Expectations, however, moderated somewhat in August, with the TEI at 62 index points.
Sacci said the July and August surveys nonetheless reflected a more positive outlook for the remainder of 2024 and into 2025.
Sacci economist Richard Downing said prevailing trade conditions, however, remained constrained.
Downing said that despite improvement in June and July, trade conditions lingered in negative territory and weakened slightly in August, with the Trade Activity Index (TAI) at 41 – below the 50-index benchmark.
“While improved economic performance is essential to underpin trade conditions, it may take longer to achieve than simply implementing curative economic decisions,” Downing said.
“The political broadening of governance has led to the encouragement of expectations in the trade environment. Although there remain notable economic challenges in providing certain logistical and other public sector services in support of smooth trading processes, a positive outlook for the next six months has propelled trade conditions upward.”
Except for input costs, which remained unchanged from July to August 2024, all other trade components turned negative.
Sacci said the adjustment to reality came after the initial optimism surrounding the formation of a more inclusive government and the prospects of improved economic performance.
Nevertheless, Sacci said the current decline in sales prices, coupled with respondents’ predictions of a further decrease over the next six months, bode well for lowering inflation.
“This trend could prompt the South African Reserve Bank to ease its monetary stance and lower interest rates, which would, in turn, stimulate additional real demand,” it said.
“More stable and predictable electricity supply by the public and private sectors, along with lower fuel prices over the first eight months of 2024, contributed positively to the trade environment.”
Sacci also noted that the latest gross domestic product (GDP) data confirmed that wholesale and retail trade, as well as hotels and restaurants, experienced tight conditions in the first half of 2024, with output declining by 2.5% year-on-year.
However, during five of the first six months of 2024, political uncertainty and bickering were prevalent.
Sacci said that after the election, a sense of urgency and responsibility toward the economy emerged among most political parties, with a focus on urgently reviving the economy.
“This shift in sentiment has renewed optimism for improved economic performance. The challenging trade environment also negatively impacted employment conditions, with only 29% of respondents hiring additional staff in August,” it said.
“Nonetheless, 50% of respondents, aligned with expected improvements in trade conditions, indicated they might increase staff appointments within the next six months.”
BUSINESS REPORT