Business confidence has hit a 15-year low, according to the SA Chamber of Commerce and Industry’s (Sacci) business confidence index (BCI) for July.
The index declined from 89.7 in June to 87.9 in July.
This is the lowest level since the index stood at 86.9 in September 1999.
Sacci stated that persistent labour unrest last month remained a challenge for businesses and that the index drop was disappointing.
“Inflationary pressures and the increase in the repo rate in July 2014 contributed to an already repressed business mood.”
Five of the 13 sub-indices were negative in July, compared to eight negative sub-indices in June.
“Important sub-indices like manufacturing output, import volumes and building activity made negative month-on-month contributions to the BCI in July 2014.”
International developments were responsible for the positive contributions of share and precious metal prices.
According to Sacci, the impact of the steel and related industries strikes in July was broader on the economy despite having a shorter duration than in the platinum metal sector.
“It is expected that large-scale rationalisation will have to take place to remain internationally competitive,” it stated.
“Employment will decline thus feeding the unemployment numbers and leading to greater inequality and an increase in the Gini coefficient.”
The latest wage demands were more than triple the inflation rate in some cases.
Sacci said this was unaffordable to businesses.
“With the consumer playing a diminishing role in the domestic economy, related measures of business confidence will likely be lower.”
The Gini coefficient measures inequality in the population.