Business Confidence Dips Deeper

SACCI released its Business Confidence Index (BCI) for October 2007.
The BCI, after bouncing back to 98,7 in September 2007, dropped to 96,9 in
October 2007 which is the lowest level for the BCI since June 2004 and a new
low for 2007.

Businesses are becoming more concerned about international economic
developments as well as local adjustment taking place. Business confidence
has lately been declining more meaningfully after being in a moderating trend
since the beginning of 2007.

The magnitude of the October drop suggests that corrections may become
more pronounced. In October the BCI was 2,6 index points lower than in
October 2006 and not less than 6,6 points lower than the record level of 103,5
recorded in December 2006.

The real economic sub-indices of the BCI are in general dipping below or
towards their longer-term trends. The positive developments in some of the
‘financial’ sub-indices in October 2007 were rather motivated by international
developments that mirror uncertainty and short-term sanctuary, than
encouraging domestic issues.

SACCI is concerned that the global economic slowdown and financial market
uncertainty in particular may have a more severe impact on countries with
large current account deficits and volatile portfolio financial inflows. South
African is fortunate to still obtain net financial inflows that more than cover the
deficit. However, the strength of the rand at present, although anti-inflationary,
does not help to put the balance of payment issues on the right track.

SACCI notes that more businesses are experiencing difficulties with local
policy dichotomies, global corrections and structural modifications that are
creating considerable ambiguity and are impacting negatively on business
confidence. It is therefore imperative that business should be prepared for an
environment that is more fickle than predictable.