CAPE TOWN: South African business confidence fell to the lowest since the end of white minority rule in May as the rand weakened and the nation risked being downgraded to junk, according to the chamber of commerce.
The sentiment index declined by 3.2 basis points to 79.3 last month, the Johannesburg-based South African Chamber of Commerce and Industry said in an e-mailed statement on Tuesday. This was 7.6 index points lower than a year before and the worst index level since June 1993.
The rand, which weakened 9.4 percent against the dollar in May, was one of the largest contributors to the fall in the index, Sacci said. The main factors that could seriously affect the nation’s economic conditions and business climate are announcements about its credit rating, the chamber said.
While S&P Global Ratings left its assessment at BBB-, with a negative outlook, on June 3, it warned it could cut South Africa’s debt to junk if the economy doesn’t improve or if institutions are weakened by political interference. Fitch Ratings Ltd. had reviewed its BBB- rating, on which it has a stable outlook, in recent weeks and hasn’t said when it will publish the results of its analysis.
South Africa avoided a downgrade by S&P “but government will have to give serious attention to measures that promote the production side of the economy,” the chamber said. A separate business confidence index compiled by FirstRand Ltd.’s Rand Merchant Bank unit and the Bureau for Economic Research fell four points to 32 in the second quarter, the lowest since the last three months of 2009. The economy is poised for another poor performance this year, RMB said in an e-mailed statement.
A government report on Wednesday will probably show the economy contracted an annualized 0.1 percent in the first three months of the year, after expanding 0.4 percent in the previous quarter, according to the median of 21 economist estimates compiled by Bloomberg. The rand strengthened 0.5 percent to 14.8357 per dollar as of 1:40 p.m. in Johannesburg. Yields on rand-denominated government bonds rose two basis points to 9.08 percent.
