The South African Chamber of Commerce and Industry (Sacci) finds in its latest Trade Conditions Survey for February that respondents are positive following the “best conditions since the middle of last year” having been experienced.

The respondents cited optimism about trade conditions following the formation of the Government of National Unity (GNU) in June 2024.

With 65% and 60% of respondents having experienced tight trade conditions in December 2024 and January this year, respectively, the 54% of respondents still facing tough conditions in February indicates a reasonable easing of trade conditions.

“It appears that the actions taken by the GNU to enhance economic performance are having a positive effect on the business environment,” Sacci says.

The trade outlook for the six months ahead moderated slightly from December 2024 to February. Whereas 75% of respondents were positive in December, only 56% of respondents had a positive outlook in February.

“The moderation of expectations most probably reflects the reality that although the reset of the economy is on the agenda of the GNU, the restoration process is not a quick fix,” Sacci explains.

Most of the components of trade activity improved in February.

Notably, the sales volumes subindex increased from 41 in January to 47 in February. Other trade components such as new orders, supplier deliveries, inventory levels and sales prices all improved in February, although they are still in negative territory at levels below the neutral 50 mark.

Rising input costs and delivering on orders impacted negatively on trade conditions in February.

Except for an expected improvement in sales volumes, the six-month outlook for all the other trade components dipped.

Although the setbacks were moderate, the expected higher sales prices and input costs in particular are of concern. More than 90% of the respondents anticipate input costs increasing in the next six months, with 86% seeing rising sales prices.

This does not bode well for inflationary expectations and easier financial circumstances.

Recently released GDP data for the wholesale and retail trade, hotels and restaurants sector showed a decline of 1.4% year-on-year in output in 2024.

However, the year-on-year decrease of output in the first three quarters of 2024 was replaced by an increase of 1.6% year-on-year in the fourth quarter of 2024.

More specific trade activities such as new vehicle sales grew by 7% year-on-year, retail sales by 3% year-on-year, merchandise import volumes by 10% year-on-year and tourism numbers by 8% year-on-year, which all points towards positive trade developments.

Merchandise export volumes, having contracted by 5% year-on-year, are a major trade activity which recently declined. With an import propensity of 31% of domestic expenditure and exports at 32% of local output, the importance of international trade and its linkages in the South African economy play a pivotal role, Sacci emphasises.

Regardless of the better trade conditions in February, only 33% of the respondents employed more staff, while 44% intend to employ more people in the next six months despite a trade outlook that is anticipated to weaken.