SA business confidence soars in June

The business confidence index (BCI) as measured by the SA Chamber of Business (Sacob) has improved from 101,3 in April, to 107 in May to 108,1 in June, the chamber said on Thursday.

Sacob CEO Kevin Wakeford said in a media statement the index has now recovered substantial lost ground after it continuously declined from September 2001 to March 2002 (except for the spike in November last year).

Only three sub-indices — the weighted exchange rate, core inflation and new vehicle sales — registered lower levels in June 2002 than in June 2001.

Wakeford said the US economic recovery remained sluggish and fragile. A weak dollar, budgetary and debt servicing problems, accounting and corporate governance scandals and speculation on more terrorist attacks on the US indicated of ”a less-than-stellar performance by the US economy”.

He said this had an effect on investor confidence in the US, placing a damper on economic prospects for the whole world, including South Africa. He also referred to the serious problems in the Brazilian economy which could further add to this uncertain international picture.

Wakeford believed these factors could be to the benefit of South Africa, which could be seen as an alternative to other emerging markets, at least in the short term.

Wakeford said that the collapse of communications giant WorldCom, after the Enron scandal, had rocked faith in corporate America, placing corporate governance throughout the world under the spotlight. He welcomed government’s stated determination to push ahead with Telkom’s listing, regardless of the latest developments at WorldCom and despite negative industry sentiments in this sector.

Wakeford commended the breakthrough achieved by African leaders at the G8 summit in Canada on the endorsement of Nepad by the industrial nations. He said strong leadership displayed by the G8 together with African leaders would guide assistance in areas such as investment, trade protocols, debt relief, humanitarian assistance and health matters to those African countries making concerted efforts to comply with the Nepad principles of sound political and economic governance.

Wakeford also commended the launch of the African Union that would provide an integrated platform from which a structured and harmonised approach to Africa’s commitment to the principles of Nepad could be launched.

He lamented the situation in Zimbabwe, saying it was a case study of a country not adhering to the principles on which Nepad was founded.

Referring to the heated debate over the new minerals bill, Wakeford called on all affected parties to work for a pragmatic consensus based on fundamental market principles.

Concerning financial stability, Wakeford expressed his concern about the effect of the latest hike in interest rates, saying such increases in a ”cost-push” inflationary environment would not necessarily deal with the present increase in prices but may quell inflationary expectations. He commented that higher import prices, export parity pricing and administrative prices were the main drivers of inflation at present. He called for a broader approach to steer down inflationary pressures and in this regard welcomed the notion of a public debate to discuss South Africa’s inflation targeting regime.

Wakeford said it appeared the rand was acknowledged to have an influence on inflation as could be seen in the effects of the fall of the currency in late 2001, pushing up prices in the first part of 2002. He therefore welcomed the strengthening and stability of the currency, which he believed created more certainty for business. – Sapa

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