Mariam Isa
14 January 2009
Johannesburg — BUSINESS confidence fell to a 5½ -year low last month, and it looks set to stay under pressure this year as economic growth slowed sharply, says the South African Chamber of Commerce and Industry.
The chamber warned yesterday against "reckless policies" to address the effect of the global recession, saying Congress of South African Trade Unions calls for laws making it harder for companies to fire workers would be counterproductive.
"We are very concerned that such actions would make the business environment more complex," chamber CEO Neren Rau said yesterday. "It might help some workers now, but in the long run business won't be sustainable." The chamber was "committed to confront this issue very strongly".
Contractions in retail sales, manufacturing and mining output will hit employment this year. Miners plan to shed 14 000 jobs as global commodity prices plunge.
The African National Congress election manifesto signals a shift to the left in economic policy but is short on detail that would confirm whether post-election changes would be radical enough to undermine business investment.
"Any robust, unsound and reckless actions by economic role players in the present sensitive business climate may be counterproductive and cause additional hardship through unintended consequences," the chamber said. Its business confidence index dipped to 83,8 last month from 86,7 in November -- its lowest since June 2003 -- knocked mainly by the recession in many of SA's main trade partners, which hit local exports.
Imports also put downward pressure on the index, along with a slowdown in the manufacturing and construction sectors, and the weaker rand.
"Business conditions will remain tight in 2009, and indications are that the global and domestic economies will start to recover only towards the end of the year."
Chamber economist Richard Downing that the economy would "do well" to notch up growth of 1,5% this year.
This compares with estimates of more than 3% last year, well below an average pace of about 5% in each of the previous four years. The economy could also slip into a technical recession in the first two quarters of this year.
The chamber said options for an economic stimulus package in next month's national budget were limited, given the "constrained conditions" in public finances.
There were strong indications that the government would fall short of budgeted revenue for the 2008-09 fiscal year, which would limit its room to manoeuvre.
The treasury has predicted its budget has stayed in the black with a surplus of 0,1% of gross domestic product (GDP) this year. That is expected to turn into a deficit of 1,6% of GDP in fiscal 2009-10, narrowing to 1,1% in the following year.
"Overstepping sound fiscal prudence" could lead to a worse than anticipated economic performance this year, the chamber said. Lower household spending, high debt costs and rising unemployment would dominate this year and waning global demand would curb exports.
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