Although the business confidence index (BCI) of the South African Chamber of Business (Sacob) has increased to its highest level so far this year, there are economic developments that could adversely affect future confidence, the chamber said.
The index increased to 128,2 in June this year from 127 in May, Sacob economist Richard Downing told reporters on Tuesday.
”This is the highest level this year and is 2,4 points above the lowest level so far in 2005, namely the 125,8 in January,” he said.
However, Sacob anticipates the future BCI could be restrained due to the rand’s depreciation, inflation showing signs of increasing from its present low, the high crude oil price, and strong real household demand through increased borrowing.
He said Sacob fears that some external factors, such as the high crude oil price, may also take a toll on business confidence and economic growth.
Downing said another concern is that annual increases are well above consumer inflation.
Businesses have to bear this cost burden and it could have an inflationary impact. Inflation is currently at 3% and the average of increases about 6%.
Continuing on labour issues, he said the country urgently needs another look at ways to create more jobs. Technology is replacing people and labour is also not necessarily dealing with its own plight well, by striking because of job losses, for example.
Downing said the African National Congress should not have shelved its ”dual labour market” proposal with slacker labour laws for smaller companies.
”It’s a pity the two-tier labour system is off the table, because we need to look at new ideas [to create jobs].
”Otherwise we could have labour turmoil, which could lead to political instability, which will negatively affect … investment in the country,” he said.
Sacob president Deidre Penfold said she does not believe that a recent countrywide strike by the Congress of South African Trade Unions to protest job losses had a negative impact on business.
However, she said it will be interesting to see the effect future strikes will have on the economy.
”It will hit us at some stage or another,” Penfold said.
On wage hikes, she said: ”We don’t want them [employees] to go hungry, but increases have to be measured against inflation.”
On inflation, Downing said the real overdraft rate declined to its lowest level since June last year.
Given the present spending scenario in the economy and a declining savings ratio to below 13% of the gross domestic product in the first quarter of this year, it is doubtful whether an easier monetary policy stance can be decided on.
Standard Bank economist Johan Botha agreed, saying the bank expects the interest rate to remain where it is for the rest of the year.
Botha released a Standard Bank and Sacob survey on Tuesday that is based on trading conditions from a business perspective.
The results for June this year indicate that trade conditions deteriorated marginally compared with May, but trading activities remained at a high level. Sales volumes were essentially unchanged, as well as new orders.
He said inventory levels contracted slightly due to the slightly weaker trading conditions.
Trade expectations regarding the medium term remained high and robust.
Current job prospects in the trade environment were somewhat brighter, as well as the outlook for employment towards the end of the year.
Trading conditions varied between provinces.
Gauteng, the Eastern Cape, the North West and Limpopo were positive about present conditions, but all other provinces experienced more difficult conditions as they moved into negative territory.
However, expectations in all provinces were positive. — Sapa