Despite five subindices that turned slightly negative in November, the South African Chamber of Commerce and Industry (Sacci) Business Confidence Index (BCI) still improved by 3.4 points month-on-month in November.

The index increased by 6.6 index points year-on-year in November, which is the largest year-on-year improvement for a month since the Covid-19 restrictions were lifted in December 2022.

More inward tourist numbers, higher precious metal prices and increased new-vehicle sales made the most notable positive impact on the BCI in November. Lower merchandise import volumes had the only noteworthy negative impact on the BCI, although no subindex had a significant negative effect on the index in November.

The initial improvement in the BCI since June 2024 has gained traction, despite a small let-up in September. Business confidence experienced increased momentum in October and November, as the effects of the new national administration on the economy and business became more concrete.

However, Sacci noted with concern and disappointment the slow economic growth of 0.4% year-on-year for the first nine months of this year, which reflects the perplexing situation the South African economy finds itself in.

The strong upward momentum of business confidence, however, confirms the resolve and understanding by the private business sector to contribute and play its respective role to improve economic performance, it added.

"This private sector effort must be complemented by an efficient and proficient public sector. The collaborative effort between business and the public sector could see the translation of improved business confidence into investor confidence, higher and sustainable economic growth, and job creation," the organisation said.

The broader political representation in the administration of national government has facilitated a positive assessment of economic prospects by business, improving sentiment and stability.

The BCI has, since the formation of the new administration in June 2024, improved gradually from a low level of 107.8 in May 2024 to 118.1 in November 2024, which is a 10.3-index-point improvement.

Month-to-month, after a 1.2-index-points decline in September, the index improved by 3.6 points between September and October 2024, and 3.4 points from October to November 2024. Only two of the 14 sub-indices had a negative bearing on the BCI in October 2024.

The BCI averaged 111.9 in the first 11 months of 2024 compared to an average of 109.4 in the corresponding period of 2023, which is a 2.5-index-point improvement on 2023.

Sub-indices of the BCI on economic activity in general had a positive short- and medium-term impact on business sentiment, as greater private-sector participation is gathering momentum to improve economic growth and employment.

The financial environment subindices had a marginally negative effect in the short term, but were positive compared to one year ago.

Meanwhile, inflation in South Africa currently suggests deflationary tendencies. Consumer inflation declined to 2.8% in October 2024, while producer prices declined by 0.7% year-on-year. However, the production prices of intermediary manufactured inputs rose by 5.5%, and electricity tariffs increased by 12.2%, Sacci said.

The relatively strong rand among its peer group of countries since a more representative national government was formed also contributed to lower fuel prices and, thus, lower inflation.

Further, the demand for salary and wage increases higher than inflation, coupled with a possible hike of some 36% in electricity tariffs, has caused the South African Reserve Bank to restrain lowering interest rates by more than 0.25 percentage points. This left the real prime rate above 8%.

GDP data for the third quarter of 2024 indicates that economic growth stalled at around 0.3% year-on-year.

The real output of the primary sector, namely agriculture and mining, contracted by 4.6% year-on-year in the first nine months of 2024. The output of the secondary sector, namely manufacturing, electricity, water and construction, declined by 1.4% year-on-year.

The output of the services sector, namely finance, personal and government, increased by 1.4% year-on-year.

"The importance of economic growth for job creation, specifically in the primary and secondary sectors, could become a panacea to address joblessness. However, it is clear that slow economic growth has led a sideways shift in formal employment," Sacci said.

"Economic growth requires fixed investment, which calls for a longer-term assessment of economic policy and its implementation. In this regard, an efficient and proficient public sector, especially public enterprises and local governments, plays a pivotal role in supporting economic activity.

"It becomes apparent that the neglect of several years will not be fixed in the short term. The slow economic growth recorded up to the third quarter reflects the desperate situation in which the South African economy finds itself. The realisation that a comprehensive effort by responsible role players to collaborate has become inevitable," Sacci noted.

The translation of business confidence into investor confidence, economic growth, and job creation will, over time, mark ultimate success, it emphasised.