Economy & Finance - 17 JUNE 2003

SACOB's Business Confidence Index for May 2003

SACOB’s Business Confidence Index (BCI) for May 2003 dropped by 4,4 index points, measuring 102,4 down from 106,8 in April 2003. This is the lowest level for the BCI this year and the lowest since April 2002. The largest year-on-year effect came from the all-share price index (down 29% on 2002), preliminary figures on export volumes (down 24% on 2002), number of new vehicle sales (down 8,8% on 2002) and manufacturing output (down 1% on 2002). For a detailed breakdown of the different sub-indices please refer to the SACOB website at www.sacob.co.za.

Of major concern during May was the discovery that some statistics issued by Statistics South Africa were incorrect. Of particular concern was the fact that the statistics on inflation data were reviewed for the last sixteen months, and overstated by more than two percentage points in April 2003.

SACOB laments this state of affairs since many economic and business decision or survey, including the national budget, was based on incorrect data.

The present economic situation leaves the monetary authorities with no choice but to lower interest rates as soon as possible. SACOB supports the general view that at least a 1,5 or even 2 percentage point drop in interest rates is necessary, since the downward phase of the business cycle clearly calls for an easing of business conditions that, if left too late, could cause structural damage if not attended to.

With GDP growth already predicted to come in below 2% for 2003, it is clear that some measures are needed to bolster a struggling SA economy. Some general economic indicators tend to confirm that in certain sectors a full-blown recession is present or is threatening.

Adding to the woes of business activities in general, South African exports are facing serious obstacles in its quest to grow this sector. In addition to the strong rand eating away at export earnings, exporters face increasing frustration about port congestions and the inability of SA ports to efficiently provide expanded logistical support to this growing sector of the economy.

The Zimbabwe situation, which is developing into further chaos and anarchy, will continue to impact negatively on the SA economy and other economies in the region. The situation there cannot continue unabated indefinitely and SACOB calls on all leaders in the region and the rest of Africa to exercise strong leadership to avert a lasting crisis in that country.

Added to this, there is a growing concern about the government’s views on land redistribution measures, exemplified by AgriSA and other stakeholders’ concerns over government utterances in this regard. SACOB believes that such unguarded statements do not bode well for any sustained future investments in the economy, be they domestic or foreign.

SACOB sincerely hopes that all stakeholders understand that the overall economic situation and business climate in South Africa is currently subdued and in danger of losing more ground.

<<Finance & Economy for May 2003