South Africa’s business confidence fell for a fourth month in a row in May, mainly due to a slide in trade activity and higher consumer inflation following a hike in Value Added Tax.
The South African Chamber of Commerce and Industry’s (SACCI) monthly business confidence index (BCI) fell to 94.0 in May from 96.0 in April, the business body said in the statement.
It was the lowest reading since October 2017, but only just shy of last year’s average of 94.4.
The measure of private sector confidence had climbed to a 2-1/2 year high in January after Cyril Ramaphosa’s election as leader of the ruling African National Congress in December in anticipation of business-friendly policy reforms following years of uncertainty under former president Jacob Zuma.
SACCI said if trade with the Southern African Customs Union was excluded, exports and imports had shown a sharp decline since March, with the rand’s strength in the first quarter of the year particularly dampening commodity exports.
Between mid-December and April, the rand gained about 10 percent against the dollar, but has since retreated over a simmering global trade war sparked by the United States’ decision to impose import tariffs on metals and other commodities.
Construction of buildings and private sector borrowing were the other sub-sectors that had a negative impact on the monthly reading.
The business body said the economy and business conditions remained on track for recovery, even after domestic growth figures on Tuesday showed the largest quarterly contraction in nearly decade.
“SACCI believes that once the challenge of good governance has been achieved, attention will focus on structural economic issues, placing South Africa on the road to sustainable economic recovery,” the chamber said, referring to the change in political leadership in Africa’s most industrialised economy.