SA's business confidence takes a further dip

According to the South Africa Chamber of Commerce and Industry (SACCI), although the figure has declined in comparison to last month, the rate of decline has slowed.

“The BCI has dropped by 8.5 index points or 8.3% since April 2007 and the average for the SACCI BCI in the first four months of 2008 is 93.8 compared to the average of 100.9 in the first four months of 2007,” said SACCI on Wednesday, 7 May.

Issues influencing business confidence in South Africa relate to uncertainty surrounding the Zimbabwe election outcome and post-election situation in that country, as well as lost domestic economic momentum with a slow in growth.

The rising food and crude oil prices on the international stage has further put pressure on local business as rising prices - including a proposed 50% plus rise in electricity tariffs - have fuelled inflationary pressures in the economy.

The SACCI said global economic uncertainty was tapered by drastic monetary action taken by the United States to ward off the possibility of a severe recession as brought about by the sub-prime crisis that led to a global liquidity crisis.

“Geo-political problems and inconsistent approaches to address problems in Southern Africa are further contributing to an already nervous business environment [in South Africa].

“Inflation and the balance of payments continue to impose risks and needs continued attention for the preservation of a consistent and accountable economic policy that is conducive to a sound business and investor environment,” said the business institution.

Economists are divided on whether the inflation targeting method of the Reserve Bank's Monetary Policy Committee (MPC) is yielding the necessary results.

Financial results indicate a slump in consumer spending with Tuesday's new vehicle sales figures falling by 2.8% to 43,536 units sold between April 2007 and April this year.

All eyes will be on the MPC as they prepare to meet in June 2008 to decide on whether to keep interest rates as is, or whether to further raise them.

Article published courtesy of BuaNews