The business climate continues to affect business confidence negatively, with the SACCI Business Confidence Index (BCI) remaining at a depressed level of 90.2 in June 2013, compared to 90.4 in May 2013.
In June 2012 the BCI was 4.7 index points higher at 94.9 while the average of 91.7 for the BCI in the first half of 2013 is 4 index points below the average of 95.7 for the BCI in the first half of 2012. This is also the lowest first half-year average since the 86.3 for 1999.

The short-term movements (m/m) in the BCI sub-indices reflect that only two of the 13 sub-indices were positive compared to May 2013, three were unchanged and eight were negative.

The year-on-year movements of sub-indices however revealed improvements in manufacturing output, new vehicle sales and construction of buildings activity. The financial environment was uncertain with three of the six financial sub-indices impacting business activity negatively on a year-on-year basis.

The disruption in global financial markets in June 2013, attributable to the announcement that the USA is considering tapering off its liquidity enhancement programme known as Quantitative Easing (QE), adversely impacted business confidence. An improperly implemented reduction in QE would have a profound effect on financial markets and on the flow of global investment funds.

Businesses in emerging markets must be prepared to accommodate a reduced liquidity environment as much of the QE liquidity found its way to emerging economies’ capital markets.

SACCI is concerned that countries considered to have high balance of payment (BoP) sensitivities, such as chronic current account deficits and dependence on portfolio capital inflows from abroad, would be hardest hit by financial market turbulence.

SACCI remains concerned about the capacity of the domestic economy to contend with the prospect of higher inflation, further constraints on access to liquidity and economic stagnancy in a variety of sectors. Investor and business confidence must be restored. Sustainable economic growth remains the only platform from which a response to South Africa’s socio-economic challenges can be addressed.