Business confidence was slightly up in November compared to October, according to the South African Chamber of Commerce and Industry’s (Sacci) Business Confidence Index (BCI) released on Thursday.
The BCI moved up by 1,1 points to 81 in November, after retreating to 85 in October, Sacci economist Richard Downing told media in Johannesburg.
In looking at the general trend of the BCI over the year, Downing said it was “ratcheting up very slowly” but it “will remain bumpy with lots of uncertainty”.
The index appears to have established itself around the 87 level and will remain in positive territory when compared year-on-year, Sacci said.
The BCI is compiled from 13 sub-indices.
Five of seven sub-indices on physical (real) economic activity had a negative impact on the BCI in November 2010 compared to the previous year.
Four of the six sub-indices reflecting on the financial environment were positive on an annual basis.
This might positively impact the real economy.
Major issues
Downing said there were three major issues that played a role in confidence in November.
The first was the “Irish problem” about which South Africa cannot do anything. This would have an effect on Europe, South Africa’s second major trading zone.
“So it will have a negative effect on South Africa,” Downing said.
The second issue was the New Growth Path economic strategy announced by Economic Development Minister Ebrahim Patel last month.
“It could have quite serious effects on the economy if not handled properly,” said Downing.
Sacci CEO Neren Rau said the strategy was “too interventionist” and contained various contradictions.
He gave the example of the Growth Path calling for the creation of 30 000 engineers by 2014, while also calling for the capping of salaries.
“How do you then encourage people to go into these areas, like engineering?”
He said Sacci would argue for the protection of the free market “as far as we believe it supports business”.
Public sector
The public sector has a role to play in the economy, said Downing.
This included creating an enabling environment for business through ensuring adequate infrastructure.
The public sector should “first do that properly before [interfering] in the free market”.
Thirdly, the 50 basis point rate cut could have implications for the economy.
Downing said gold was playing a lesser role in the South African economy than it used to. In the early 80s, gold production contributed 15 percent to the gross domestic product. Nowadays, it contributed 2,5% to 3%.
Downing said “don’t expect shooting stars” of the BCI next year, but that it would probably improve at a slower but more sustainable rate. — Sapa