Despite various headwinds, the SACCI Business Confidence Index (BCI) improved in February 2020 as it increased by 0.5 index point to 92.7.
“On an annual basis the index was marginally down by 0.7 index point on February 2019,” said SACCI CEO, Alan Mukoki.
“The slight rise of the BCI in February indicates that the business climate, although gloomy, is battling the odds of a tight financial environment and subdued economy.
“After the BCI measured 93.1 in December 2019 (the highest BCI level in the second half of 2019), the domestic and global business climate experienced exogenous setbacks additional to the expected local economic slowdown.”
Mukoki said that the exogenous effect of the Corona virus had a notable effect on global financial and commodity markets.
“Although the effect spilled over to the real economy in terms of global trade and output in certain countries, the monthly BCI data did not reflect major effects in South Africa,” he described.
“However, like in January, the rand, share prices, and international commodity prices like that of crude oil and precious metals, varied significantly.
“Five of the thirteen sub-indices of the BCI deteriorated relative to their January 2020 readings, five sub-indices remained unchanged, and three positively affected the BCI in February 2020, namely lower core inflation, increased volumes of merchandise imports, and more new vehicles sales.”
Mukoki added that the business climate deteriorated slightly between February 2020 and February 2019 with the BCI declining year-on-year by 0.7 index point.
“Higher merchandise export volumes, lower core inflation, and the higher US-dollar prices of precious metals in particular enhanced the business climate compared to February 2019.
“The President delivered the 2020 SONA at a crucial juncture in the South African economy. The importance of inclusive growth and the removal of structural economic obstacles were emphasised,” he also said.
“In addition, the Minister of Finance had to deal with several challenges that emanate from past public finance trends, control, management, macro-economic imbalances, and a deteriorating economic potential and a slowing economic growth in Budget 2020/21.
“The Budget did not only require a financial balancing act, but also called for measures that do not cause further damage to the economy and at least stabilise the present fiscal situation.”
Mukoki further said that Budget 2020 is no stimulatory budget or even a holding operation but is born out of a desire to stabilise the economy and begin restructuring the environment for a more sustainable position.
“More painful adjustments caused by subdued economic growth may occur if business and investor confidence are not inspired to higher levels.”