Madeleine Wackernagel
AFTER the sharp deterioration in October/November, the business confidence ind ex for December/January showed a recovery of one percentage point.
The reason, says the South African Chamber of Business (Sacob), which compiles the index, is partly a turnaround in sentiment, thanks to the stronger rand,
the prospect of a cut in interest rates, and expectations of a soft landing fo r the economy this year.
Sacob also cited the renewed commitment by the government to its growth, emplo yment and redistribution (Gear) strategy as a contributory factor, but called on the government to “harness the political will to set the economy on the gro wth high road as set out in Gear”.
While Sacob acknowledges the potential political difficulties in implementing the strategy, it is adament that “1997 presents a window of opportunity during which the Gear strategy must get off the ground and some of the less palatabl
e aspects of the strategy need to be tackled. These include accelerated tariff reform, labour market flexibility and privatisation.”
Sacob is also optimistic on the chances for an interest-rate cut, thanks to a drop in credit demand, but issues a cautionary note: “With inflation at around 9%, there is little motivation to borrow funds at 18% – since any funded proj
ect would need to make 27% to break even. As the marginal projects are shelved because of the prevailing inflation rate/interest rate conditions, fewer job
opportunit
ies are generated … with the economy slowing down on the one hand and intere st rates relatively high on the other, small and medium-sized business is espe cially vulnerable to higher insolvencies.”
The employers’ organisation is also concerned at the magnitude and persistence of the current account deficit – R10-billion in 1996 – but sees hope for nar
rowing the trade gap this year, in line with the rand’s depreciation. The worl d economy should continue to perform well, leaving room for South Africa to ex pand its exports.
“Non-gold exports should receive a boost this year, with various export financ e guarantee schemes coming on line,” says Sacob. “Niche opportunities, especia lly in minerals beneficiation, are still available for exploitation.”