Business confidence edges up on lower rates

Business confidence in South Africa ticked up in December as the South African economy began showing signs of recovery, the SA Chamber of Commerce and Industry (Sacci) said on Wednesday.

Business confidence in South Africa ticked up in December as the South African economy began showing signs of recovery, the SA Chamber of Commerce and Industry (Sacci) said on Wednesday.

South African business confidence rose to a four-month high in December as low interest rates helped boost manufacturing and construction in Africa’s largest economy.

The South African Chamber of Commerce and Industry (Sacci) said its business confidence index (BCI) rose to 93 points from 91.7 in November. For the year, business confidence declined to an annual average of 94.1 in 2012 — the lowest level recorded since 2000, when it stood at 92.7.

Although the December 2012 figure improved slightly, the fourth quarter of 2012 was the poorest performing quarter of the year.

“The relative price stability and the easing of the monetary policy stance in South Africa have assisted the economy and averted a more serious economic slowdown,” the chamber said. “The promise of improvements in confidence will only realize if the threats of continued labor protest activity, already revealed in the early days of 2013, are dealt with decisively.”

The central bank on November 22 left its benchmark interest rate unchanged at 5 percent, the lowest level in more than 30 years, after a surprise cut in July aimed at bolstering the economy. Inflation has stayed within the central bank’s 3 percent to 6 percent target band since May.

The business environment remained constrained by uncertain local and global economic performance, unresolved labour disputes domestically and investors’ reservations about South Africa’s future economic prospects, Sacci economist Richard Downing said.

The BCI gauges the business community's mood in response to economic conditions. It uses 13 sub-indices which include manufacturing, exports, imports, vehicle sales, construction, share prices, inflation, and the rand exchange rate.

The pace of decline in business confidence moderated during the year and the level at the end of 2012 was still unacceptably low, Downing said.

"Given that 2010 is the current BCI base year [at 100 points], the deterioration to an average of 94.1 for 2012, after averaging 119 in 2006, gives an indication of the extent of erosion of local business confidence in recent years."

Positive contributions to business confidence came from manufacturing and construction activity, while all the financial sub-indices had a positive impact with the exception of the rand exchange rate.

The rand was positive on a monthly basis, but negative on an annual basis. Municipal services, import volumes and retail sales made negative contributions to the BCI on both a monthly and an annual basis.

"There were signs of a possible recovery in certain real activities towards the end of 2012," Downing said.