Johannesburg | Tuesday
SACOB’s Business Confidence Index (BCI) dropped from a level of 101,0 for February to 99,3 in March, continuing the downward trend evident since August 2001.
”Comparing the sub-indices in January to the previous month’s levels, six sub-indices improved, five had a negative trend and two moved sideways,” Sacob CEO Kevin Wakeford said in Johannesburg at the release of the BCI.
It was however encouraging to see that in the main, the rand appeared to have stabilised and even strengthened during the first quarter, he said.
”[This] brings a measure of certainty and price stability in foreign market transactions… business can now plan its activities in a more coherent and measured way, especially those sectors with strong foreign exchange related operations such as importers and exporters.”
Wakeford said the positive trend should impact positively on business in the coming months and expressed the hope that it would continue.
However, he added, March had also seen a further hike in interest rates of one percent.
”Sacob accepts that while this interest rate increase may counter an inflationary spiral, the effect of the demise of the rand will still feed into the general price level,” he said.
The underlying inflationary trend was a structural phenomenon and not necessarily a demand side problem.
Wakeford expressed his concern that a policy of increasing interest rates to control inflation would kill off prospects of sustainable economic growth.
”South Africa urgently needs to address many social ills such as unemployment and poverty. Higher economic growth will attract more capital and create opportunities for risk-taking by business, thereby expanding their operations and creating new jobs.”
To this end, Wakeford called for an urgent and substantial privatisation programme.
He furthermore commented on the steady increase in the US dollar price of crude oil, saying that it already impacted significantly on the South African economy with the sharp increase in the price of petroleum products during March.
”This could lead to further increases with the resultant inflationary pressures on goods and services in the value chain, given the unravelling of the situation in the Middle East,” he said.
Sacob economist Richard Downing, who commented on the export component of the economy, said South Africa’s economic performance was to a greater extent more dependent on export volumes and the global economic recovery than competitive currency depreciation.
”The current situation also poses a serious challenge to domestic suppliers of goods and services to provide quality products at competitive prices,” Downing said.
The export performance remained a pivotal aggregate to engender growth, but much would depend on the pace of the recovery in the world economy, he said. – Sapa