Calls for big policy shifts damaging confidence

Business confidence is under pressure from “ill-conceived” demands for debate about drastic shifts in economic policy, the South African Chamber of Commerce and Industry (SACCI) has warned.

The warning comes amid a standoff in the ruling alliance over calls for a radical rethink of policy on nationalising the mines, scrapping the inflation target framework and introducing taxes on capital inflows to curb unwelcome gains in the rand.


“SACCI is concerned that what appears to be a burgeoning trend toward improvements in business confidence may be compromised if not supported by consistent policy messages and approaches,” the chamber said yesterday, when it released its confidence index.

The warning amplifies a statement earlier this week from the Chamber of Mines, whose president, Sipho Nkosi, said investment in mining could suffer from continued talk of nationalisation, despite repeated reassurances that it is not official policy.

“There is no certainty in terms of the kind of investments that you can make because you don’t know the outcome of the 2012 report,” Mr Nkosi told Reuters.

“That really causes some concern in people’s minds.”

The SACCI said that “poorly articulated” demands for radical economic policy shifts were sowing confusion in business.

“Although confidence might hold up over the short term, the policy proposals being publicly debated have serious structural implications for the functioning of a sustainable economy,” it said. The SACCI was making the comments at the release of its business confidence index for last month, which rose by 0,2 points to 87,8 after climbing 3,3 points in August.

The SACCI said it was also concerned about fixed investment from the private sector, which makes up 60% of overall investment. It crept up 0,4% in the second quarter of the year after shrinking for five quarters.

The Reserve Bank was upbeat on the economy yesterday, saying that financial strain on consumers was starting to lift as balance sheets improved and banks eased their lending standards.

“Growth in bank credit granted has begun to increase, the growth rate in impaired advances is decelerating and banks’ lending standards are showing signs of loosening,” it said. The remarks were made in its twice-yearly financial stability review.

In the second quarter there were improvements in household disposable income, financial assets and net wealth.

Insolvencies, civil summonses and debt judg ments declined, as did the rejection rate of applications for credit, the Bank said.

“These and other developments seem to indicate that household balance sheets are on the mend and consumer financial vulnerability is improving....”

Growth in consumer spending, the economy’s main engine, slowed to 4,8% from 5,7% in the second quarter.

But at the same time the ratio of household debt to disposable income dipped slightly to 78,2% from 78,7%, showing households were continuing to reduce debt.

Debt service costs to disposable income fell to 8% from 8,2% in the first quarter of the year.

The SACCI index is compiled from 13 economic indicators including credit growth, retail sales, manufacturing, inflation, share prices and the rand.

Source: Business Day