South Africa’s business confidence slipped further in August to its lowest level in 2007, affected by global financial market turbulence, the South African Chamber of Business (Sacob) said on Wednesday.
The Sacob Business Confidence Index declined to 98,1 from 99,6 in July, confirming a downward trend as most of the indicator’s sub-indices deteriorated during the month.
”The moderation of business confidence in South Africa essentially follows on the adjustments to which the global economy is subject at the moment,” the chamber said in a statement.
”These imbalances are causing nervousness on a global scale, which is manifesting in the volatility of global financial markets, and causing hesitancy and a lack of direction.”
Global fears that problems among United States subprime mortgage lenders could spread into a world credit squeeze have knocked markets, prompting the Federal Reserve to cut its discount rate to bring calm.
Johannesburg stocks have been volatile, with the rand also unsteady as investors reassess their appetite for riskier assets.
The turmoil has raised concerns over the sustainability of capital inflows that have so far covered South Africa’s wide trade and current-account deficits. The current account shortfall stood at 7% of gross domestic product in the first quarter of 2007.
”South Africa, as a relatively small open economy, has to be prepared for the adjustments that will affect business confidence and economic prospects within its own borders,” Sacob said. ”Some global adjustments and corrections could hold major risks for the South African economy.”
The risk of attracting the inflows needed to finance the deficit, in an environment of global economic and financial corrections, had increased, it said.
Sacob said uncertainty fuelled by recent protests over a lack of basic services in parts of South Africa and a divisive leadership battle in the ruling African National Congress (ANC) may also affect future business confidence.
The ANC will elect a new president at a party congress in December. — Reuters