The Reserve Bank has scope for another 1,5% interest rate next week, Standard Bank economist Pallie Botha told the monthly SA Chamber of Business (Sacob) Business Confidence Index (BCI) briefing on Thursday.
”A 1,5% interest rate cut is warranted at this stage,” he said at the conclusion of a short briefing on Sacob’s SA Trade Managers Index.
Sacob economist Richard Downing, in his presentation, noted that the BCI had continued to recover in July after dropping to 102,4 in May and re-gaining some lost ground in June.
”The BCI measured 108 in July compared to 105,8 in June. The July figure is the highest this year and also the highest since the 108,1 in June 2002,” he said.
Downing also announced that the more favourable conditions had allowed him to up his growth estimate for the current year to 2,6%.
He was further pleased to note that the rand was far more stable in July than in previous months.
In June he had said that the volatility in the value of the currency was playing havoc with the ability of Sacob members to plan ahead. ”Although the appreciation of the rand over the past year is affecting the profitability of local exporting concerns, the
stronger rand made a significant contribution in bringing down inflation. Indirectly, the stronger rand will continue to affect local inflation by lowering business costs on the input side,” Downing said.
Sacob chief James Lennox said sustainable lower inflation was of primary importance to Sacob’s members.
”This will provide the monetary authorities with an environment conducive to an accommodating monetary policy stance and further interest rate cuts.
Notwithstanding the relatively high levels of real interest rates, the faster rate of the increase in money supply and credit provided to the private sector, a touch of uncertainty about financial discipline exercised by borrowers is present,” he said.
Lennox and Downing argued that the rate of economic growth in South Africa remained ”worrisome” and that higher levels of growth were needed to help address the high unemployment rate revealed in the 2001 census results.
”Unemployment remains one of the major challenges that needs to be addressed, and in this regard Sacob welcomes the Brenthurst initiative as a possible catalyst for a broad based debate on economic growth and transformation in our evolving society,” Lennox said.
The Oppenheimer family launched the initiative in Johannesburg on Tuesday. The project proposed a national transformation scorecard, creating corporate tax incentives linked to transformation performance, and formulating a plan to close the black economic empowerment funding gap.
While not of the view that the national Treasury would buy into the tax break, Lennox said the initiative had already sparked a debate, which was necessary in itself.
As an aside to job creation, Lennox also said Sacob was experiencing trouble pushing through its learnership programme that aimed at creating 170 one-year internships in the chamber movement. By July, 60 of the posts were filled.
It had become fashionable to knock the Sectoral Training Authorities (Setas), he said, adding that business also needed to stop seeing skills development as a nuisance and had to start seeing it as an opportunity to create employment.
At the same time, the Setas had to simplify their procedures for small business. He cited the Services Seta as one training authority that had done so, with good results. – Sapa