The adverse set of circumstances prevailing in September turned-around in October 2015 and caused the SACCI Business Confidence Index (BCI) to regain 6.8 index points in October 2015 to measure 88.4.
This is 0.4 points below the BCI of October 2014 and turned the BCI away from a 22-year low of 81.6 in September 2015, according to the report. Although the October BCI may not represent a turnaround, it provisionally arrested the downward momentum in business confidence.
Developments within local and global financial markets and economies caused some important economic and market trends to positively influence the immediate short-term business outlook and climate in October. However, physical and real economic developments will eventually determine the sustainability of these positive developments over the short to medium-term.
Positive month-on-month changes of physical business activities followed the September pattern, but with important sub-indices like export volumes, retail sales volumes and share making positive contributions. The financial sub-indices had no negative month-on-month impact in October 2015. The comparative year-on-year business climate deteriorated marginally in October compared to October 2014.
Real economic as well as financial circumstances were less conducive to business confidence in October 2015 than in 2014. The financial climate remains uncertain with international capital flows hinging on interest rate decisions in the United States while international commodity and precious metal prices remain relatively low. The domestic as well as global financial situation will continue to impose hesitancy in financial markets.
It is of concern that remuneration of employees in government continues to increase by more than inflation and that its relative size in the economic classification of the MTBPS continues to rise to 36,5% of total expenditure by 2018/19. Although spending priorities as indicated in the MTBPS favours social expenditure at the expense of economic growth enhancing functions, disruptions for service delivery by government continues unabated.
The student protests across South Africa concerning financing of tertiary education highlighted the importance of government priorities. However, it also highlighted the fact that economics are about choices that are influenced by the scarcity of resources. Economic growth is about enhancing and enlarging the pool of resources available when making choices. A fine balance therefore has to be struck to optimise a desirable outcome. Disruptions do not contribute to making choices easier, nor serving the general interest or augmenting business confidence.