Business confidence is at record levels aided by a strong rand, lower domestic inflation and a surge in consumer spending, the SA Chamber of Business (Sacob) said on Tuesday.
Sacob’s business confidence index (BCI) reached a level of 130,9 points in September, which is 3,1 points higher than August’s level of 127,8.
The rand was key in influencing positive business perceptions, Sacob senior economist Richard Downing told reporters in Johannesburg.
The strong rand played a role in bringing down the inflation rate. This in turn influenced the decrease in interest rates, which had a positive impact on consumer spending, he said.
”The big question is whether it’s sustainable at these levels. That we’ll see in months to come.”
The BCI is based on 13 sub-indices, eight of which were positive in September.
These included manufacturing production, new vehicle sales, real retail sales and the US dollar price of gold and platinum.
”The indication is that the economy is alive and kicking,” he said.
Despite the buoyant business mood, Downing warned that net investment in the economy was ”still not at levels we’d like”.
Although capital inflow into South Africa was R130-billion from 2002 to the second quarter of 2004, Downing said only R9,3-billion was net investment.
The rest was mainly portfolio investment, which could always leave the country if the South African economy appeared troubled.
He said if confidence could be maintained at this level, however, it could bode well for longer term confidence from local and foreign investors.
South Africa’s growth rate at 2,5% was also one of the lowest among emerging market economies.
The deficit on South Africa’s current and trade account ”might pose problems for future confidence. We have to make sure we can keep it within control.”
Given the possible inflationary impact of the high crude oil prices on the economy, Downing expected the interest rate to remain at its current level.
Sacob’s findings were reinforced by similar findings by the South African Trade Management Indices, a survey of trading conditions among mainly small and medium-sized businesses.
Standard Bank’s senior economist JP Botha told reporters on Tuesday: ”Conditions in September are very much the same as those in August. This implies the economy is chugging along quite nicely.”
Those surveyed expected a continued upward trend in trade expectations fuelled by low inflation and interest rates and a strong rand, he said.
Botha indicated that although employment had remained stagnant since August 2000, ”we are starting to see signs that (businesses) will start to increase employment numbers”. – Sapa