SACCI Business Confidence Index
SOUTH AFRICAN CHAMBER OF COMMERCE AND INDUSTRY Business Confidence Index December 2017
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SACCI Business Confidence Index – December 2017
Content: The SACCI Business Confidence Index (BCI) This Month’s BCI Results Impact of Business Climate Indicators Economic Commentary General Economic Indicators
Because of information lags and changes in expectations, the dynamics of the business mood, at times, may be at variance with the economic environment. As a result, always read the BCI with other economic data and the accompanying economic commentary. For notes on the BCI, see the SACCI website at www.sacci.org.za.
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SACCI Business Confidence Index – December 2017
The SACCI Business Confidence Index 2015=100 Month
2010
2011
2012
2013
2014
2015
2016
2017
January February March April May June July August September October November December
110.8 113.2 113.5 114.8 111.8 115.7 115.0 119.5 119.8 117.2 118.7 119.5
119.4 118.0 120.6 118.7 117.2 118.5 114.6 114.2 113.9 112.9 112.8 114.7
112.4 115.2 110.8 109.2 107.4 109.9 105.2 110.0 106.2 106.5 106.2 107.7
108.8 107.7 104.7 106.9 104.7 104.4 105.0 104.8 105.8 105.5 105.1 106.4
104.5 106.4 107.3 107.2 102.9 103.8 101.8 103.0 103.3 102.8 105.1 102.2
103.4 107.4 103.2 104.1 100.6 97.9 101.8 97.6 94.5 102.3 95.1 92.2
92.6 92.7 94.0 95.5 91.8 95.1 96.0 92.9 90.3 93.0 93.9 93.8
96.4
Average
115.8
116.3
108.9
105.8
104.2
100.0
93.5
94.4
SACCI Business Confidence Index 150 140
Upward Phase of the Business Cycle BCI 2015 = 100
130
Index
120 110 100 90 80 Source: SACCI
Jan-85 Nov-85 Sep-86 Jul-87 May-88 Mar-89 Jan-90 Nov-90 Sep-91 Jul-92 May-93 Mar-94 Jan-95 Nov-95 Sep-96 Jul-97 May-98 Mar-99 Jan-00 Nov-00 Sep-01 Jul-02 May-03 Mar-04 Jan-05 Nov-05 Sep-06 Jul-07 May-08 Mar-09 Jan-10 Nov-10 Sep-11 Jul-12 May-13 Mar-14 Jan-15 Nov-15 Sep-16 Jul-17
70
SACCI BCI Compared to Previous Year 10
5
-5
-10
-15
-20 Source: SACCI
-25
Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17
index points difference
0
2
97.7 95.5 93.8 94.9 93.2 94.9 95.3 89.6 93.0 92.9 95.1
SACCI Business Confidence Index – December 2017
This Month’s BCI Results The SACCI Business Confidence Index (BCI) improved by a further 1.3 index points in December 2017 to 96.4 following on the improved business mood in November 2017 with an increase of 2.2 on the 92.9 in October 2017. The BCI was nearly seven index points better in December 2017 than the lowest 2017 BCI level of 89.6 in August 2017. Starting at 97.7 in January 2017, the BCI dipped to below 90 in the middle of 2017, but since then recovered lost ground to close 2017 at 96.4. The average for the BCI in 2017 was slightly up to 94.4 compared to the average of 93.5 for 2016. The BCI improved on a more positive business mood and political developments that are expected to put South Africa in a position for more encouraging business and economic policy options. The current improvement in the Business Confidence Index is therefore also partially explained by political developments taking place in the Southern African region. The expectations for more policy certainty and sustainable growth orientated domestic economic policy, global economic growth, and a probable fresh approach towards business and investor challenges, should further augment the business mood. Four of the thirteen sub-indices that comprise the SACCI BCI, had a positive month-onmonth (m/m) impact in December 2017; five sub-indices moved sideways and four were negative. The three negative sub-indices in December 2017 compare favourably with the seven negative m/m effects of November 2017 and support the improving business mood. Five of the seven real economic sub-indices had either neutral or positive m/m impacts on the business confidence index in December 2017 and imply improving activity in the shortterm. More foreign merchandise trade volumes had a notable positive monthly influence on the BCI in December. Real retail sales and share prices had the biggest negative monthly impact on the BCI in December 2017. The improved year-on-year (y/y) BCI in December 2017 was the result of six sub-indices improving on a year ago, three sub-indices remained unchanged, and four sub-indices were negative. Higher merchandise export volumes, lower consumer inflation and more new vehicle sold had the largest positive y/y impact on the BCI in December 2017. Lower merchandise import volumes, the real cost of financing and the rand exchange rate had the largest negative y/y effect on the BCI. Only two of the seven real economic activity sub-indices had a negative y/y effect on the December 2017 BCI while financial conditions was also more positive in December than a year ago with four of the six sub-indices being positive.
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SACCI Business Confidence Index – December 2017
Impact of BCI Sub-indices on the BCI
This Month
Previous Month
y/y Changes
-
o
o
o
o
+ + +
+
+
+
-
-
-
+
+
Retail sales
-
o
Construction - buildings
+
-
+ +
-
-
Inflation¹
o
Share prices
-
+ +
Real private sector borrowing
o
o
+ + +
+ + +
Real financing cost
o
-
-
-
Precious metal prices
-
o
+
o
Rand exchange rate
+
-
-
-
This Month
Previous Month
m/m Changes
BUSINESS CLIMATE INDICATORS *
Energy Supply
o
Manufacturing
o
Exports Imports Vehicle sales
* See notes on BCI on www.sacci.org.za 1. Excludes petrol, food and non-alcoholic beverages.
Cyclical Moves of Selected BCI Sub-indices 160
120 100 80 60 40
SHARE PRICES
RETAIL SALES
BUILDING PLANS
MAN PRODUCTION
VEHICLE SALES
EXPORT VOLUMES
20
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17
Long-term Trend = 100
140
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SACCI Business Confidence Index – December 2017
Economic Commentary Traces of Improving Economic Prospects As mirrored by the sub-indices that make up the SACCI BCI, the business mood and business climate in addition, have been supplementing the hints of improvement in the financial markets and the economy. The latest economic figures confirm these suggestions of improving prospects. For the momentum in the business mood to continue, it should be met and augmented by urgent economic policy action. Some dubious financial and management practices in the public and the private sector dented South Africa as a sound business and investment environment. Openness and transparency, however, drove these practices out in the open. Reactions from Parliament and responses by financial markets and businesses indicate that responsibility and accountability carry notable weight in the South African economic and business fraternity.
Recent Economic Advances Apart from the data contained in the sub-indices of the BCI and important data indicated in the table of General Economic Indicators on page 8, a number of global and domestic positive economic endeavours could improve the environment in which businesses have to function in in 2018. The following features will be important to compliment the domestic business mood:
Higher global economic growth; World trade volumes to gather pace with improved export volumes for emerging markets; Higher international commodities prices; Improved real domestic demand; Real fixed investment by the private sector depending on South Africa as viable investment destination (see Chart 1); Rising real household disposable income; The terms of trade to improve; Continued net inflow of capital to South Africa; Credit extension to be contained; The real cost of finance; The exchange rate and volatility of the rand; Improved credit ratings by respectable rating agencies, and Restraining public sector debt and borrowing (see Chart 2).
The present reserved outlook for the South African economy could be improved significantly if the matters mentioned above are either utilised and/or remedied or addressed by supportive economic policy decisions and socio-political and financial stability.
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SACCI Business Confidence Index – December 2017
Chart 1 Real Gross Fixed Investment 30
Y/Y % change
20
10
0
-10
Public Sector -20
Private Sector
3Q17
1Q17
3Q16
1Q16
3Q15
1Q15
3Q14
1Q14
3Q13
1Q13
3Q12
1Q12
3Q11
1Q11
3Q10
1Q10
3Q09
1Q09
3Q08
1Q08
-30
Chart 2 Household and Government Debt 100 90
Gov't Debt as % of GDP
80
Household Debt as % of Disposable Income
Percent
70 60 50 40
30 20
0
1Q80 1Q81 1Q82 1Q83 1Q84 1Q85 1Q86 1Q87 1Q88 1Q89 1Q90 1Q91 1Q92 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17
10
Source: SARB, Quarterly Bulletin, December 2017.
Controversial Economic Matters Changing the ownership structure of the South African Reserve Bank (SARB) is a matter that could increase the risk levels and financial and economic uncertainty in present frail economic circumstances. The SARB plays an important role in maintaining price stability and containing the inflationary process. These are imperatives and necessary conditions for sustainable and higher economic growth. Ample examples exist in countries where the central bank and monetary policy has come under threat and where credit extension has become exuberant and seen as a panacea for economic ills. This led to hiper inflation and demise of the domestic currency and imploding of the economy in the medium to longer term. It caused dire consequences for the people it was supposed to assist. Property rights remain a critical issue if investment avenues and destinations are critical matters to be pursued – notably in a country like South Africa with inadequate savings
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SACCI Business Confidence Index – December 2017
(capital generation) and therefore dependent on supplementary foreign fixed investment. These economic policy options will bring further uncertainty and are ingredients that will make the promotion of South Africa as an investment destination problematic. It is therefore exceedingly important that land reform and the role of the central bank be handled with circumspection within the ambit of the Constitution and economic growth objectives.
Conclusion It is apparent that the present traces of improvement in the business climate call for greater responsibility and accountability of business and the public sector. It is important that all stakeholders in the economy take advantage of the leadership opportunities that present itself and drive inevitable and urgent decisions in order to restore confidence in South Africa as an investment destination. The challenges faced by fiscal consolidation, unemployment, excessive debt, low growth and sovereign credit ratings are difficulties that require visionary leadership and urgent and strong action. There appear to be suggestions of optimism beyond the improvement in SACCI’s Business Confidence Index. Economic dynamics in Southern Africa have set in motion the realisation that economic performance could improve to serve the broader population.
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SACCI Business Confidence Index – December 2017
General Economic Indicators Indicator
Consumer inflation headline urban (%) Consumer inflation urban - excl. food, bev. & fuel (%) Money supply M3 eop (% Δ Y-o-Y) Private sector credit eop (% Δ Y-o-Y) Real prime overdraft rate eop (%)* Prime overdraft rate eop (%) Liquidations number sa Bond yield 5-10y govt eop (%) R / US$ average R / Euro average
Indicator
Period
Direction
Latest
Nov-17 Nov-17 Nov-17 Nov-17 Nov-17 Dec-17 Nov-17 Dec-17 Dec-17 Dec-17
Date
4.6 4.3 6.6 6.5 5.7 10.25 220 7.88 13.13 15.55
Direction
Latest
Previous
4.8 4.3 5.0 5.4 5.7 10.25 194 8.55 14.05 16.50
Previous
2016
6.3 5.8 6.1 5.1 4.4 10.50 161 8.65 14.70 16.28
2016
2011
5.0 4.0 8.3 6.2 4.8 9.00 297 8.01 7.25 10.08
2011
Income & wealth tax / GDP (%) saar Total tax / GDP (%) saar Public sector borrowing requirement / GDP (%) Public sector expenditure / GDP (%) Budget Balance / GDP (%)
q3-17 q3-17 q3-17 q3-17 q3-17
14.6 27.3 6.7 41.3 -9.4
16.3 29.3 6.9 28.5 -3.2
15.1 28.2 3.8 28.4 -4.2
14.1 26.0 4.2 27.1 -4.0
Imports / GDE (%) Exports / GDP (%) Net foreign investment flows / GDP (%) Current account balance / GDP (%)
q3-17 q3-17 q3-17 q3-17
28.1 29.1 2.5 -3.7
29.1 30.0 3.3 -1.6
30.2 30.3 4.8 -3.3
29.9 30.4 3.4 -2.2
Gross domestic saving / GDP (%) saar Gross capital formation / GDP (%) saar Net fixed capital formation / GDP (%) GDP growth (% Δ Y-o-Y)
q3-17 q3-17 q3-17 q3-17
16.3 18.7 0.8
16.2 18.6 1.3
16.1 19.4 5.4 0.3
17.5 19.7 6.2 3.3
Δ=change; eop=end of period; Y-o-Y=year-on-year; q=quarter; sa = seasonally adjusted; saar=seasonal adjusted annual rate; GDP=Gross Domestic Product; GDE=Gross Domestic Expenditure. *Deflated by inflation excl.food, bev. & fuel.
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