SACCI executive.

THEBE MABANGA

THE outbreak of the COVID-19 pandemic and the national lockdown imposed to contain the spread of the virus have had a more devastating impact on business confidence than Financial Crisis of 2008/2009, the South African Chamber of Commerce and Industry (SACCI) said on Wednesday as it called for urgent reforms.

SACCI reported that the Business Confidence Index (BCI), which measures the business sectors forward-looking sentiment in economic conditions, was almost unchanged in September at 85.7, down from 85.8 in August.

At the height of the lockdown, in April this year, the index fell 12.1 index points and fell a further 7.7 points in May.

It has since recovered by some 15 points up to August. 

The BCI was still 6.7 index points below the September 2019 level and averaged 84.3 over the first nine months of 2020 compared to 92.6 for the comparative period in 2019.

“COVID-19 and the lockdown process has had worse consequences for the business climate than the global recession of [2008] as the Sacci BCI is currently well below the depressed average BCI level of some 113 in 2009,” the chamber said.

The index was dragged down by depressed retail sales volumes, lower share prices at the JSE and reduced credit to the private sector.

SACCI says the 275 basis points rates cut implemented this year by the Reserve Bank has had a positive impact.

In a sign that business believes there are better times ahead, the index was boosted by increased manufacturing output, as well as increased merchandise export and import volumes.

The chamber acknowledges that the lockdown may have had positive impact on health, but it has ravaged the economy.

“It appears that the management of the COVID-19 pandemic by government’s command council had a relatively successful impact on managing the health pandemic and ensuring mortality rates were much lower than originally forecast,” the business body said.

“The economy, however, took the pain given rising unemployment, business closures and the GDP decline,”

The chamber acknowledged efforts to re-open the economy, now standing at 18 days of Level 1 and argued that should the be a need to lockdown the economy, it should be confined to an area with the highest new infection rates.

SACCI has upped the ante on the need for government to implement reforms that have been long called for by ratings agencies.

“Structural adjustment is not a choice anymore but a necessity,” the chamber said, noting “corrective action is necessary for the unsustainable fiscal situation in all public sector institutions, including the likes of Eskom, SAA, PRASA, SABC, and Denel.”

The chamber welcomed recent high-profile public arrests for corruption, arguing this will go some way to restore local and foreign investor confidence, “but further structural economic adjustments are required to steer economic policy in a credible direction and towards growth and employment creation”.

The chamber said South Africa appears to have survived the worst of new infection of the coronavirus while the Northern hemisphere appears to be grappling with a second wave of infection and deaths.

(COMPILED BY INSIDE POLITICS STAFF)

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