The Business Confidence Index (BCI) of the South African Chamber of Business (Sacob) increased further to 119,7 in November after registering 116,5 in October. The index is now 14 points above last year’s November level and is a fresh record high for the index.
Sacob said on Thursday that the sequence of events that influenced the business conditions was first the appreciating rand and then inflation dropping substantially, which in turn has led to “a delayed but meaningful” easing of monetary policy since June.
Sacob said, however, that it remains important that business confidence becomes more broadly based and is supported by real economic activity in order to be sustainable. The sustainability will be put to the test during the course of 2004 when the rand effect should normalise, Sacob added.
Between October and November 12 sub-indices positively influenced the BCI while one remained neutral.
Sacob added that the state of the South African economy has to be viewed in the context of what is happening in the global economy. Definite signs that the United States economy appears to be on a set path of recovery and growth, and with Europe also showing signs of economic recovery, should be good news for South Africa.
With inflation now being contained Sacob believes that the climate is conducive for another cut in interest rates at the next meeting of the monetary policy committee of the Reserve Bank, due next week.
The Finance Minister in his medium-term Budget policy statement indicated that conditions have become somewhat tight within the fiscal environment. Sacob, however, supports the government’s strong emphasis on economic growth, reduction in unemployment and the alleviation of poverty, it added.
Sacob also welcomed the government’s intention in the medium-term Budget policy statement to “improve” the regulatory environment to overcome the obstacles that confront especially small business, where the most pressing need is for the involvement of more people in the mainstream economy.
“Sacob reiterates that a business environment must be created that makes it easy for small business in particular to comply with the regulatory environment and that micro economic reform should be a priority for government,” it added.
Sacob said that the Aids pandemic remains a concern in that it impacts heavily on the cost of doing business in South Africa. Sacob said it trusts that the anti-retroviral campaign launched by the government in November will meet with much success and calls on business and other stakeholders actively to support this campaign.
Sacob is concerned that the improved BCI to a large extent hinged on the rand, which performed exceptionally well against all the major currencies. A broader-based confidence level would have provided more comfort.
“It therefore remains important to realise that the present high business confidence level can only be assured if all role players accept that the present business confidence is not broad-based, that it could be fragile, and that it should be nurtured,” it concluded.
The Sacob/Standard Bank Trade Conditions Survey will be released on December 9, it said. — I-Net Bridge