/ 4 September 2008

Business confidence dips to five-year low

South Africa’s business confidence index (BCI) fell to a five-year low of 90,5 in August from 92,8 in July as weaker local and global economic activity weighed on sentiment, a survey showed on Thursday.

The South African Chamber of Commerce and Industry (SACCI) said the economic climate in South Africa remained ”brittle” and the decline showed that the slight pick-up in the BCI in July did not mark a turnaround in confidence.

Of the thirteen sub-indices, positive contributions came from five in August 2008 compared to three in July 2008.

Eight sub-indices had a negative impact on the BCI’s movement in August 2008.

The August 2008 figure confirmed that the positive July 2008 reading did not yet mark a turnaround in business confidence, SACCI said.

The BCI was now 7,6 points lower than in August 2007 and the lowest August reading since the 87,2 of August 2003.

In aggregate, the weak local and global economic environment continued to exert negative pressure on business confidence in South Africa although there were signs that some sub-indices were remaining flat rather that declining further.

”The economic climate in South Africa remains brittle and although there are signs that the downward trend in some activities may have abated, there are still instances where renewed pressures have come to the fore.”

Matters of law and order, labour market disruptions and political posturing were pressuring already delicate economic circumstances, SACCI said.

While SACCI had noted the economic growth figures released recently with interest, it recognised that sectoral growth was diverse and that ”the high growth sectors did not necessarily reflect an improved economic growth scenario for the present”.

Progress towards an improved platform for medium to longer-term growth could be secured on the basis that other production factors could complement a renewed fixed asset base.

Once firm indications emerged that the cycles associated with some key economic variables might have bottomed out, business confidence might be swayed more positively, SACCI said. – Reuters, Sapa