SA business confidence improved in January – but only very slightly

The South African Chamber of Commerce and Industry (Sacci) has released its Business Confidence Index (BCI) for January 2016.

The BCI measured 80 in January 2016 and gained marginally on December 2015 by 0.4 index points – but was 9.3 points lower than in January 2015.

“The adverse set of local and global business and economic conditions in December 2015 gained momentum in January 2016 and negatively affected the Sacci Business Confidence Index (BCI),” the group said.

The month-on-month changes of the BCI sub-indices were more encouraging than the changes in December 2015, Sacci said.

January 2016 saw five indices moving positive month-on-month, three remaining undecided and five turning negative.

“The financial climate was slightly more favourable towards business in January 2016 than in December 2015 as the volume of credit extension to the private sector picked up but the other financial sub-indices weighed on the business climate with notably higher real financing costs,” it said.

There was no positive year-on-year impact on the BCI that came from real economic activity in January 2016.

All thirteen sub-indices but for one sub-index, were negative with only lower core inflation (used as sub-index), making a positive year-on-year impact on the BCI.

Inflationary expectations, however, could soon change the marginal positive inflationary environment.

In addition to global economic misfortunes, South Africa experienced homegrown concerns that worsened the economic and business climate in South Africa as the domestic economy was plagued by several disruptions that prevented the economy performing better, Sacci said.

“Not only were the economy and its performance affected, but it also had a bearing on public finance and several public sector institutions and tiers of general government to deliver goods and services.”

“The credit downgrade during December 2015 by credit rating agencies and the possibility of these agencies giving South African government bonds junk status, is a major cause for concern.”

Sacci admitted that there are no quick fixes to provide an instant panacea for longstanding structural challenges.

“It is, however, important that action be seen as credible, feasible and consistent in order to re-establish investor and business confidence.”

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SA business confidence improved in January – but only very slightly