Ina Opperman

By Ina Opperman

Business Journalist


Another business confidence survey highlights SA’s decline

The South African economy gained positive momentum up to the second quarter of this year, as recent economic data indicated.


Another business confidence survey shows a decline, but it is still better than in March 2020, when it measured 89.9 before the Covid-19 pandemic started.

According to the South African Chamber of Commerce and Industry’s (SACCI’s) Business Confidence Index (BCI), the index declined to 91.0 in September 2021.

The highest level so far this year was 97.0 in May, while the lowest level since the inception of the BCI was recorded in May 2020 at 70.1. Although the BCI declined over the last four months, the average for the first nine months of 2021 showed a 9.8 index point improvement on the same period in 2020.

Compared to a year ago, when the business climate started to recover, the September levels also show a much improved business climate, despite the lagged effects of the July 2021 disruptions. The level of 91.0 compares favourably with the 85.7 of September 2020 according to the index.

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SACCI: Decline in business confidence

Business confidence declined from 91.6 in March 2020 to 76.4 in June 2020. In the first quarter of 2021 it measured 94.3 and increased to 96.0 in second quarter, before dipping to 92.0 in the third quarter, clearly reflecting the effect of the looting and disruption in certain parts of South Africa.

The unrest caused the most severe negative month-on-month impact on the business mood in July, when it dipped by 3 index points, followed by a 1.3 point decline in August and a 0.9 point decline in September. These short-term declines disrupted the upward momentum of the business climate up to June.

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Good and bad impact on business confidence

According to SACCI, five sub-indices had a positive month-on-month impact on the business climate between August and September this year thanks to increased merchandise export and import volumes, as well as an increased number of new vehicles sold. On the other hand, less retail sales volumes, lower manufacturing output and a decline in the real value of building plans passed, affected the business mood negatively last month.

However, energy and water supply concerns, along with increased utility tariffs and higher fuel prices also contributed to a distrustful business outlook as secure energy supply remains a crucial concern.

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Dire need for capital

Another key element is the dire need for capital to finance fixed investments, largely influenced by longer-term foreign as well as local investor confidence. Public and private sector investment has not been adequate since 2016 to sustain economic development. The chamber says it remains imperative that South Africa’s real economic growth improves to beyond 3% per year.

South Africa needs clear, consistent and investment friendly economic policy to convince local and foreign investors of a reasonable return on investment.

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Foreign trade performance

Another plus is South Africa’s impressive foreign trade performance with a substantial surplus on the trade account of the balance of payments (BoP) which not only led to a positive balance on the Current Account of the BoP and a surge in the terms of trade, but also positively influenced the rand exchange rate and tax receipts from the mining sector.

High international commodity prices continued in the third quarter of 2021, reflecting global supply shortages and strong demand from a return to normality for leading advanced economies, which provided a welcome windfall for the South African economy.

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Positive momentum

The South African economy gained positive momentum up to the second quarter of this year, as recent economic data indicated, but the openness of the economy further highlighted its sensitivity to global events.

SACCI expects the Medium-Term Budget Policy Statement (MTBPS) that new finance minister, Enoch Godongwana, will deliver in November to give direction on positive economic and business developments for the future.

While the pandemic had an adverse effect in some parts of the globe since early 2021, improved vaccine application has supported economic recovery as a rule in other areas.

However, the chamber cautions that vaccine access and rollout have become essential elements that affect economic recovery globally.

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