Business morale dips on economic concerns

Business confidence in South Africa slipped in July on signs the economy is still struggling to gain momentum after last year’s recession, a survey showed on Thursday.

The South African Chamber of Commerce and Industry (SACCI) said its business confidence index (BCI) edged down to 84,3 points in July from 84,8 in June as euphoria from the Soccer World Cup faded and the focus shifted back to the hesitant economic recovery.

The country has also been plagued by a wave of strikes.

Africa’s biggest economy exited recession in the third quarter of 2009, but while growth remains on track the pace has been sluggish.

The South African Reserve Bank says the economy should perform well below its potential of 4,5% growth this year.

SACCI said compared to July last year, eight of the sub-indices of the BCI improved, with retail sales and building construction still lagging recent economic improvements.

Retail sales have risen since the beginning of the year, but consumer spending remains largely constrained, with households struggling with high indebtedness, while unemployment remains a concern.

“Rising domestic production costs in South Africa and a stronger rand make it difficult to compete internationally on the export market, but also with imports in the local market,” SACCI added.

The rand has rallied against the dollar, touching a three-and-a-half month high against the dollar this week and leading to renewed calls from labour unions for the central bank to intervene to weaken the currency.

The Reserve Bank has said it will let the market determine the exchange rate.

“Stronger domestic demand and stronger [leverage] in the international trade environment are necessary to promote sustained improvements in business confidence,” SACCI said.—Reuters