The South African Chamber of Commerce and Industry (Sacci) Business Confidence Index (BCI) continues to “lack substantial upward momentum”, the chamber said on October 12, reporting that the index stood at 108.2 in September.

This compares with a level of 108.6 in August.

The BCI for September was also 2.7 index points below the corresponding level in September 2022.

From an average level of 112.5 in the fourth quarter of 2022, the BCI declined to an average of 112 in the first quarter of this year, before dropping further to 107.6 in the second quarter. The index, however, recorded a small rebound to an average of 108 for the third quarter.

Despite the absence of a strong upward trend in business confidence, Sacci said, the BCI appears to have stabilised, with an average of 109.2 for the first nine months of this year, slightly surpassing the 108.7 average recorded during the same period in 2022.

In the short term, foreign business related factors, including merchandise imports, exports and inward tourism, had the most positive impact on business confidence in September.

Over the medium term, increased inward tourism and higher precious metal prices made notable positive year-on-year contributions.

However, Sacci noted that the unpredictability of the weaker rand against major trading currencies, a higher real cost of credit and lower merchandise export volumes had the most notable negative year-on-year impacts on business confidence in September.

Addressing the current fiscal challenges, the chamber noted that there was “a renewed emphasis on preserving debt-servicing capacity in public finances”.

Many countries, including South Africa, are compelled to consolidate over the medium term to achieve prudent debt targets.

“The International Monetary Fund (IMF) highlights the importance of critical institutional reforms tailored to the needs and constraints of developing countries. These reforms encompass medium-term budgeting, fiscal risk management, expenditure controls and revenue administration,” Sacci said.

It added that the recent Brazil, Russia, India, China and South Africa (Brics) Summit in South Africa had explored alternatives to the World Bank and the IMF to better cater to the specific needs of emerging economies, although the details of this alternative Brics approach “require further verification”.

South African Finance Minister Enoch Godongwana acknowledged the tight fiscal conditions and debt situation, necessitating the application of austerity measures by the government.

Treasury has also cautioned that the fiscus is under unprecedented revenue and expenditure pressures.

“This fiscal strain is reverberating across various public sector institutions, impacting on service delivery, from central government to local authorities,” Sacci commented.

Overall, the BCI continued to exhibit a sideways movement, signaling that the current business climate was “not conducive to stimulating overall economic activity”.

Remedying this situation and enhancing the economy’s long-term prospects will require appropriate investments in human capital and fixed capital stock, Sacci suggested.