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S. Africa's business confidence slips to 16-year low

Xinhua, June 4, 2015 Adjust font size:

South Africa's business confidence slipped to a 16-year low last month, the South African Chamber of Commerce and Industry (SACCI) said on Wednesday.

SACCI's Business Confidence Index (BCI) slumped to 86.9 in May 2015 compared to the level of 86.8 registered in September 1999, the chamber said in a business survey released in Johannesburg.

Comparisons with more recent figures show the BCI two index points lower than in May 2014 and three index points lower than in April 2015.

The 86.9 for May 2015 is lower than the lowest 2014 level of 87. 9 in July 2014.

Although the world economy finds it tough to expand at a similar rate than before the "Great Recession" of 2007/08, it looks like only some countries are succeeding in improving their performance, SACCI said.

South Africa's economic performance, however, is falling behind both that of Africa and the rest of the world, said the chamber.

The disruption by electricity supply shortages is having a telling impact on the output of sectors such as manufacturing and electricity, said the chamber.

This was reflected by recently released GDP data which showed a slow down of GDP at 1.3 percent in the first quarter of this year.

Load shedding is also greatly disruptive to the services sector. This is of great concern to SACCI and notably to small and medium size businesses, said Peggy Drodskie, Acting SACCI CEO.

SACCI noted that more indications and suggestions point to tighter financial conditions that may lie ahead.

Higher global interest rates and financial downgrading of South African institutions will compel South Africa to follow suit by increasing interest rates, according to the chamber.

It said the vulnerable balance of payments (BoP) position and possible further capital outflows will leave no alternative than for an interest rate increase.

The South African economy is in a very delicate and peculiar situation, Drodskie said.

Although it is in dire need of foreign capital for financing struggling public sector institutions, infrastructure and compliment overall local fixed investment, the business and investor climate are not convincing, he added. Endi