The South African Chamber of Commerce and Industry (Sacci) has warned that confidence among the business community could take a further knock after sentiment dipped for a second month in a row prior to the May 29 elections.
The Sacci Business Confidence Index (BCI), released yesterday, dipped by 5.8 points in April to 108.9, and further to 107.8 in May – a decline of 6.9 points over the two months.
The latest BCI reading indicated a second consecutive month of declining business sentiment, negatively impacted by the domestic elections.
Political developments are of special concern to business given their potential effect on economic policy and the business climate, and the formation of the Government of National Unity (GNU) is currently uncertain.
Sacci said the formation of the new government, given the election results, will largely determine the future course of business confidence.
Sacci’s economist Richard Downing said the almost unchanged year-on-year BCI suggested a probable regressive business climate due to possible unwarranted political developments.
Downing said the recent national elections had an insightful outcome, implying a change in the political guard, and this adjustment could have unwarranted and unintended consequences for the economy and the well-being of South African citizens.
He said political stability and policy certainty will be fundamental assurances that drive business and investor sentiment.
“South Africa has an opportunity and duty to set the economy on the road to recovery through responsible and accountable governance. The public and private sectors, as well as citizens, should exercise their respective duties and abilities in line with the Constitution and sound economic values and perspectives,” Downing said.
“The political deviousness of parties during the election process should give way to pragmatism and reality that serve future economic improvement, performance, prosperity, and inclusiveness.”
Over the year to May 2024, the Sacci BCI increased by 0.9 points to 107.8 from 106.9 in May 2023 largely driven by inward tourism and the improved rand exchange rate.
Positive effects also came from the higher global price of precious metals and lower inflation.
Meanwhile, Citadel chief economist Maarten Ackerman yesterday said the outcome of coalition talks over the next two weeks was likely to determine the country’s economic direction for the next few years.
“We need a government that can fast-track policy and provide policy certainty, but we are unlikely to see this in the year ahead,” Ackerman said.
“We may see slower-than-usual formulation and implementation of policies, especially economic policies, as the new GNU finds its feet over the next year. We’re unlikely to see any real policy support for the economy in the next year, given that the focus will be on political issues.”
Speaking on the current political landscape, Ackerman said it remained to be seen if there will be a change in economic policy after the GNU talks are concluded.
“If the GNU is pro-populist, we may see a change in policy,” he said.
“If it tilts towards pro-business or if it is business as usual and we can get private sector participation to address some of the important structural issues in the economy, we can get the economy back to capacity growth. However, that is a big ‘if’.”
BUSINESS REPORT