Confusion over policy hampering growth

Uncertainty over economic policies such as nationalisation was hampering efforts to raise SA’s growth rate, business said yesterday, while acknowledging confidence improved slightly last month.

The South African Chamber of Commerce and Industry (Sacci) business confidence index showed only a slight increase last month, according to data released yesterday , suggesting business was still pessimistic about SA’s future.

The index rose 0,6 points to 87,6 last month from 87 in November.

"It will be challenging to muster the momentum towards growth while investment and household spending are driven by credit, and while employment and fixed investment remain subdued," Sacci said.


Low levels of investment, low household spending and unemployment were areas of concern.

Although the government has said repeatedly that nationalisation, especially of mines, is not official policy, the ruling African National Congress (ANC) has set up a task team to report back to its national executive on nationalisation. While some critics see this as the death knell for nationalisation, which has been promoted aggressively by the ANC Youth League, others fear it keeps the policy thrust alive.

Sacci economist Richard Downing agreed nationalising mines in SA would upset business and said he believed it would severely stifle foreign investment, a key tool in the economy’s future. "SA must aggressively explore opportunities in international trade as an important source for demand and investment," he said.

"The present level of business confidence, although better than a year ago, will remain vulnerable to questionable economic policy positions and disruption of economic activity."

Although business confidence overall improved last year from the year before, Mr Downing was worried SA’s infrastructure projects would not create an environment strong enough to boost economic growth significantly.

"With substantial investment in economic infrastructure, especially electricity and roads, the level of fixed investment should continue to support the demand side of the economy although it will not be at a level that could fast-track growth," he said.

Sacci also said that low levels of investment, household spending being driven by credit and weak job creation posed threats to business growth.

The business confidence index improved gradually last year compared with the year before. It began the year with a fall to 82,5 in the first quarter, from 83,3 in the last quarter of 2009, but averaged 83,7 in the second quarter before rising to 86,6 in the third quarter and 86,8 in the last quarter of the year.

Its average for the year was 84,9, up from 82,8 in 2009.

Source: Business Day