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The South African Chamber of Commerce and Industry (Sacci) says that as the country remains in a fragile situation, the government must continue to pursue conducive policies and an environment that encourages the business sector to accelerate growth and job creation.
The chamber released its latest business confidence index for September 2020, on Wednesday (Oct 7).
Since Sacci’s last BCI release in July 2020, the index improved from 82.8 to 85.8 in August 2020, but fell marginally to 85.7 in September 2020. After declining 12.1 points from index in April 2020 and another 7.7 in May 2020, the BCI has now recovered about 15.7 index points through August 2020.
However, business confidence appears to be struggling to regain its pace as the BCI declined marginally in September 2020 by 0.1 index points.
The BCI was still 6.7 index points below the September 2019 level and averaged 84.3 for the first nine months of 2020 compared to 92.6 for the comparative period in 2019.
“Covid-19 and the closure process have had worse consequences for the business climate than the global recession of 2007/08, as Sacci’s BCI is currently well below the BCI’s depressed average level of about 113 in 2009.” , He said.
On a monthly basis, the most negative effects from BCI sub-indexes came from still depressed retail sales volumes, lower JSE share prices and less real credit to the private sector.
On the positive side, improving merchandise export and import volumes and manufacturing output made the biggest contributions to the business climate in September, the business chamber said.
The accommodative financial environment helped alleviate some of the difficulties experienced in business, he said.
Sacci said that the strict and long-lasting Covid-19 mitigation measures in South Africa and some of the regulatory measures had a significantly negative impact on businesses, households and government revenues.
“It appears that the management of the Covid-19 pandemic by the government’s Command Council had a relatively successful impact on managing the health pandemic and ensured that death rates were much lower than originally predicted.
“However, the economy suffered due to rising unemployment, business closures and falling GDP,” Sacci said.
Stats SA said last month that GDP in the second quarter of the year declined by 51% on a seasonally adjusted annualized basis.
However, the academics pointed out that the country’s GDP in the second quarter, compared to the first quarter, fell not by 51%, but by 16.4%, quarter-over-quarter.
Commentators emphasized that despite the reality ‘misrepresentation’ of GDP by the 51% figure, it should not distract from the fact that the country is in a deep recession.
Even with a 16.4% quarterly drop, the impact of the blockade on GDP in nominal terms has been severe and the country will take a long time to recover from this position, they said.
The statistics body also published its latest Quarterly Labor Force Survey for the three months to June 2020, which shows that the number of employed people decreased by 2.2 million to 14.1 million in the second quarter of 2020 compared to the first quarter of 2020.
The greatest decreases in employment were observed in the formal sector (1.2 million), followed by the informal sector (640,000), private households (311,000) and the Agricultural sector (66,000).
“The decline on the supply side of the economy represents only one part of the economy’s salvation process that needs urgent attention. One side of stifled demand and noticeably waning fixed investment, along with the effect on unemployment, provide the main challenges for the economy to grow and create jobs.
“Structural adjustment is no longer an option but a necessity while attending to contemporary economic restoration in the meantime.”
The chamber noted that the sequence of restoring the economy has already begun with the phasing out of restrictions to level 1, but should be accelerated and restricted to the most infected areas and communities without causing further damage to the overall economy.
Corrective action is necessary for the unsustainable fiscal situation in all public sector institutions, including those of Eskom, SAA, PRASA, SABC and Denel.
Sacci said that high-profile public arrests for corruption will go some way to restoring the confidence of local and foreign investors, “but more structural economic adjustments are required to steer economic policy in a credible direction and toward growth and creation. of employment “.
“As the country remains in a fragile situation, the government must continue to implement enabling policies and an environment that encourages the business sector to accelerate growth and job creation at a time when the Northern Hemisphere appears to be heading for a second wave. of infections.
By contrast, South Africa appears to have come through the worst phase of its infections, he said.
“It has become clear that the economy can be restored if a phased corrective process is urgently implemented,” Sacci said.
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