The South African Chamber of Commerce and Industry (Sacci) has revealed that its business confidence index (BCI) for December last year reached a notable 112.1, marking the second-highest level for the year, surpassed only by the January 2023 peak of 112.9.

Throughout last year, the BCI maintained an average level of 109.6, consistent with 2022, and higher than the 108.5 recorded in 2021.

Although the BCI experienced a dip in the middle of 2023, it rebounded in the fourth quarter.

The BCI increased marginally to 112.3 last month, potentially indicating a sustained elevation in business confidence going forward, Sacci says.

However, the economic landscape in South Africa continues to present several challenges for both the economy and the business community. Critical events such as Budget 2024 and the State of the Nation Address (SoNA) are expected to play pivotal roles in shaping business confidence for the rest of the year.

Between December and January, eight out of the 14 BCI subindices contributed positively to the overall BCI, while two remained unchanged and four had a negative impact. These combined movements led to a modest 0.2 index point improvement from December to January.

Noteworthy short-term positive impacts in January were observed in increased merchandise imports, higher sales of new vehicles, a rise in inward tourism, and an uptick in retail sales. Conversely, reduced volumes of merchandise exports had the most significant negative impact.

Sacci reported that the BCI experienced a minor year-on-year decline in January of 0.6 index points, in contrast to the month-on-month improvement of 0.2 index points. While these changes were relatively small, Sacci says this suggests a degree of stability in the BCI.

Inward tourism emerged as the only subindex making a significant positive impact over the year to January 2024. Less severe negative effects were attributed to reduced real values of building plans passed, lower volumes of merchandise imports, a weaker and more volatile rand exchange rate, and a decrease in the number of new vehicles sold.

Sacci says South Africa's economic policymakers are confronted with numerous challenges, including achieving inflation targets, maintaining an appropriate monetary policy stance, and alleviating wage and price pressures.

“Fiscal tightening must align with the monetary policy stance, necessitating a restructuring of budgetary capacity to handle externalities, an expansion of the tax base through enhanced economic growth, and the mitigation of public sector debt. These considerations should take centre stage in Budget 2024,” Sacci adds.

In Sacci’s view, the upcoming SoNA and Budget 2024 will be instrumental in determining the trajectory of business and investor confidence for the rest of the year.