The South African Chamber of Business (Sacob) Business Confidence Index (BCI) continued to increase to another highest level of 116,4 in October after the high of 112,3 reached in September and the 110,9 in August.
The chamber announced on Thursday that since June this year, the BCI has rapidly improved as monetary policy became less restrictive and price stability, as reflected by the trend towards lower inflation, became evident at producer as well as consumer level. The situation was supported and underpinned by the rand appreciating considerably against major currencies.
Eight sub-indices positively influenced the BCI, one remained fairly neutral and four restrained the BCI.
Sacob is encouraged by the current inflationary trends and hence less restrictive monetary environment due to the further lowering of interest rates during October. However, Sacob concurs with general opinion that overall general economic indicators point to an even further relaxation of the monetary environment in the months to come.
The strong level of the rand against major currencies continues to impact negatively on certain sectors of the economy. On the flip side, however, Sacob believes that the economy is possibly now entering a period of less volatility and more stability with the currency hopefully remaining more stable.
The chamber added that the upswing in the US economy, boosting hopes of a possible pick-up in the global economy and hence promoting a more positive global outlook, could be good news for South Africa’s economy, especially in the export sector which should benefit from possible increased activity in the global export markets, if a global turnaround could be sustained.
Sacob is disappointed with South Africa’s lower ranking in international competitiveness as measured by the World Economic Forum. The inclusion of South Africa’s ability to sustain medium to long term sustainable economic growth, the pervasive nature of organised crime and the deterioration of public institutions as areas of concern are particularly worrying in regard to the possible negative impact on the attitudes and perceptions of potential investors and tourists.
“These perceptions could also be reinforced by the apparent ever increasing brain drain from South Africa, where statistics indicate that the emigration of skilled professionals is up on the previous year’s figures. This widening of the skills crisis remains a worrisome aspect of the economy,” it said.
October also saw the launch of the Financial Services Charter aimed at accelerating black economic empowerment (BEE) in the financial services sector.
Sacob indicated that while it welcomed the imperatives for this charter, it was, however, concerned to what extent this charter, as with other charters, would impact on the profitability of sectors and the influence it might have on investment perceptions by foreign institutions and banks in particular.
The overall picture of the economy, however, remains fairly positive especially after the preceding two years of a volatile currency, high inflation and high interest rates. For business and consumers alike the prevailing conditions in which to conduct business appear to be more favourable than the same time last year.
The Sacob/Standard Bank Trade Conditions Survey will be released on 11 November 2003. – I-Net Bridge