Although the South African Chamber of Business’s (Sacob) business confidence index (BCI) eased for the third consecutive month, the May level of 127 was little changed from the April reading of 127,2, March’s 127,5 and February’s 126,9.
Sacob said this could imply that the BCI has reached a plateau from which it may drift downwards.
Although the BCI has maintained a high level, there has for some time been a turnaround in some sub-indices.
The average of the BCI for the first five months of this year is nonetheless still 4,4 index points or 3,6% above the average for the corresponding period in 2004.
Sacob sensed subtle shifts that have taken place in the economic milieu that could have a profound impact on business confidence in future.
These changes were both external and internal in nature and were brought about by purposeful intent on the economic-policy front or by unintended consequences flowing from exogenous and/or global developments.
The most profound has been the vote on the European Union Constitution and the latest domestic monetary policy stance.
Sacob is concerned that the subtle changes may include the last interest-rate move to a “growth”-oriented monetary policy stance at a time where there are risks at stake. Unintended consequences may result from an obviously more risky approach.
Business confidence may be dented if an inconsistent and impulsive policy environment sets in.
The continuation of a responsible, consistent and transparent policy approach remains of paramount importance to avoid damaging the level of business confidence that has been achieved.
Sacob noted that there are efforts to explore the possibilities of a bigger role for the state in the economy. However, the state in South Africa will first have to ensure that it can affect efficient, optimal delivery of the goods and services it is already committed to providing before it should contemplate extending its role and change economic direction.
Sacob believes investor confidence remains the ultimate aim in order to achieve an acceptable level of sustainable economic growth.
It welcomed the recent impartial and independent judicial outcomes and its endorsement with regard to, firstly, the responsibility and rights of all role players with regard to private property ownership and, secondly, the unacceptability of corrupt practices.
Sacob said continuing low inflation, stable but high dollar gold and platinum prices, high import volumes and a continuing high real value of building plans passed counter-balanced the turnaround in the cyclical trends of other sub-indices used in compiling its BCI.
It added that the status of business confidence reflects a delicate balance at present. — I-Net Bridge