South Africa’s business confidence ticked up slightly in April helped by global investor demand for emerging market assets, the South African Chamber of Business (Sacob) said on Tuesday.
Sacob’s Business Confidence Index (BCI) edged up to 101,9 points in April, after slipping to 99,5 in March from 100,5 in February.
April’s reading was still 2,4 points lower than the same month last year, and Sacob said this signalled confidence levels in Africa’s largest economy were starting to moderate.
”The improvement in the BCI in April can largely be ascribed to the positive global financial market sentiment that spilled over onto the domestic financial markets,” Sacob said in a statement.
The all-share index on the Johannesburg Stock Exchange rose by 3% in April, breaking the 28 000 mark for the first time.
South Africa’s largest fashion retailer Edcon’s finalised its $3,5-billion buy-out by a private equity company in April while a Shoprite buyout is still pending.
”There’s too much money floating around in the world, and South Africa happens to be very attractive to people looking for investment opportunities, as we have seen at the JSE,” said Richard Downing, a Sacob economist.
However, he added, although the resulting strength of the rand currency, now trading near four-month highs at 6,9385 to the dollar, ”is positive for importers and the inflation outlook, it is bad news to exporters at current levels”.
Sacob said there were signs of slowing tempo in the domestic economy and local factors only made a marginal positive contribution to April’s increase in confidence.
But in the short and medium term, the high level of credit, higher inflation and the current account deficit and excessive domestic demand would influence business confidence.
The central bank said inflation was likely to tick up to 5,9% in the third quarter, just short of the upper band of the three to six percent target range, while the current account deficit stood at 7,8% in the fourth quarter of last year.
Sacob said it was confident that while business confidence would moderate, it could remain relatively high. – Reuters