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Africa|Business|Energy|Financial|Health|Sustainable|System
Africa|Business|Energy|Financial|Health|Sustainable|System
africa|business|energy|financial|health|sustainable|system

Covid-19 to make it difficult to attend to structural economic matters in the short term

8th April 2020

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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The South African Chamber of Commerce and Industry’s (Sacci’s) Business Confidence Index (BCI) decreased by 2.8 index points to 89.9 in March following on an uptick of 0.5 index points in February.

The March BCI was 1.9 index points lower than the 91.8 of March 2019. It is also the sharpest month-on-month decrease since the 2.9 index points decrease in August 2019.

The Covid-19 pandemic shock and the economic impact thereof came on top of a tight business climate and a subdued South African economy. According to a statement on April 8, the economic effect of the Covid-19 on trading partners and lately on the South African economy became more evident and pronounced towards the end of March.

However, except for new-vehicle sales and energy supply, the effects of Covid-19 were not yet reflected in the available data for the real economy.

The statement also indicated that the credit downgrade to junk status by Moody’s on March 27 did not have a profound effect on the March BCI as this came at the tail end of March.

However, negative monthly impacts on the BCI came from a lower number of new-vehicle sales, the weaker exchange rate of the rand against the major trading currencies, and lower share prices; which are all mainly owing to global uncertainty and unpredictability caused by Covid-19.

Lower interest rates, improved terms of trade, and the decline in the dollar crude oil price somewhat comforted a nervous business community, Sacci added.

However, the chamber emphasised that an important aspect of managing the virus as a health threat was to flatten the curve of infections and mitigate the spread of the virus so that the health system, such as medical facilities and hospitals, was not overwhelmed and was able to cope when infections peak. 

The chamber referred to President Cyril Ramaphosa’s address, wherein the chamber found that he “acted timeously to alert South Africa to the impact of Covid-19”. According to Sacci, apart from the virus’ effect on health, the impact on the economy could be severe and all social and business partners have to contribute to limit the shock effect of this pandemic. 

As such, the chamber believes extraordinary steps and sacrifices by government, business and households will be necessary over the weeks ahead.

It did lament, however, that the long-term effects are not clear, but averred that all efforts should be put in place not to create fear and panic and to put sound economic policy in place to ensure sustainable economic performance beyond Covid-19 and the effects of the lockdown.

South Africa’s national lockdown is, so far, expected to come to an end on April 16.

In this context, Sacci urged South Africa not to neglect efforts to re-establish business and investor confidence after the present distractions of Covid-19 have subsided.

“Although some of the effects of the Moody’s downgrade of South Africa’s sovereign credit rating to Ba1 have been factored in by financial markets, the outlook remains negative,” Sacci said, adding that the Covid-19 outbreak will make it difficult to attend to structural economic matters in the short term.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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