Business confidence improves in April as all eyes turn to polls - index

The Business Confidence Index (BCI) of the SA Chamber of Commerce and Industry (Sacci) improved by 1.9 index points to 93.7 compared to March.

The April 2019 level is, however, still 2.3 index points below that of April 2018.

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According to Sacci this still points to a cautious business climate in SA.

The year-on-year decline of business confidence in April 2019 was mainly caused by the inflation rate excluding petrol, food and non-alcoholic beverages, depreciation of the rand, less merchandise export volumes and share prices on the JSE, according to the index report.

"The capital and financial markets remained relatively stable during April. The rand strengthened but remained unstable," Sacci commented in a statement on Tuesday.

"The outcome of elections should bring more clarity to business and enhance better planning and decision making. Business and investor confidence will become pivotal to the economy and the business climate in the second half of 2019."

Five of the 13 sub-indices of the BCI improved on their March 2019 readings. The five that improved are the rand exchange rate against the major trading and investment currencies, higher share prices on the JSE, increased real value building plans passed, real retail sales, and merchandise import volumes.

• READ: 8 reasons why SA trade is still much lower than a year ago

"The once off nature of political campaign activities that include high expenditure on printing and advertising may lull one to a false sense of comfort about business confidence," cautioned Sacci in a statement issued on Tuesday.

"The abrupt absence of load shedding is by no means an indication that all is well at Eskom for example, yet the benefit of this absence, increased campaign spending and other favourable events benefit businesses and increase business confidence."

It added that, although once off, the benefit of not having load shedding cannot be taken for granted but was most welcomed by business.

Also, the common theme of election manifesto policies among the parties to drive economic growth and job creation seems to resonate well with the markets, according to Sacci.It creates a belief that there is adequate seriousness by parties and by government to fight corruption and drive an economic growth agenda. "The upcoming elections create an unpredictable economic environment for the next month or two. The likely outcome of the elections is not difficult to speculate on to the extent that policy certainty is not in doubt," said Sacci.

"Effective implementation of these policies is more in doubt as it depends on the extent of President Cyril Ramaphosa's victory within the ANC than the ANC's own victory."

In the view of Sacci, Ramaphosa's victory would protect and shield his leadership from vicious factional battles within his party, that have plagued his presidency since his appointment.

"Business confidence is likely to be emboldened by this outcome," said Sacci.

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