The South African Chamber
of Commerce and Industry (SACCI) response to
The South African Chamber of Commerce and industry (SACCI) welcomes the announcement of the Medium-Term Budget Policy Statement (MTBPS) delivered by the Honourable Minister of Finance Mr. Pravin Gordhan, MP. We note with concern the revised growth target of 0.5% for the fiscal year of 2016. The 0.7% growth predicted for the 2017 fiscal year is encouraging, albeit still significantly low given the economic, political and social challenges that we face.
We wish to encourage the minister to continue with the austerity measures to bring inline the non-investment related expenditure, including wasteful government spending. We however caution the minister from adopting austerity measures which may, appear good on the face of it, yet have a negative impact on the SMME sector which relies mainly on supplying goods and services to government departments and related entities. This could have a devastating effect on job creation and can cause job losses especially amongst the low skilled workforce.
The minister’s announcement of R 900 billion plus in proposed infrastructure expenditure should ignite significant economic activity to drive job creation and establish the necessary infrastructure platforms in energy, logistics and telecoms. These investments are key in consolidation and improving South Africa’s global competitiveness as an investment destination.
The minister also announced additional allocations to address shortages in the funding of higher education. We hope that these measures will be received positively by the key stakeholders, especially the affected students.
We wish to encourage the government and its relevant departments to scale-up their execution capabilities in implementing the projects announced in the MTBPS.
Higher Price Expectations
SACCI’s Trade Conditions Survey showed that since May 2015 circumstances remained uncertain and were still in negative territory in April 2016. The seasonally adjusted (SA) composite Trade Activity Index (TAI) nonetheless recovered from the low 39 in December 2016 and registered 47 in April 2016 – slightly better than the 45 in March 2016. The TAI SA was 3 points lower in April 2016 than the 50 of April 2015. Respondents alluded to the subdued macro-economic performance, unaccountability, seasonal factors, drought and shrinking margins as prominent issues contributing to tentativeness in the sector.
The non-seasonally adjusted TAI decreased from 48 to 47 with new orders notably declining significantly by 8 index points. The sales volumes sub-index remained unchanged at 51 in April 2016 while the inventories index increased from 46 to 50. Supplier deliveries stayed at 44.
There was a further increase in price sub-indices with the sales price sub-index increasing by 3 points to 71 while the input cost sub-index rose by 1 point to a new high level of 85 in April 2016. The input cost and the sales price indices were respectively 16 and 9 points higher than in April 2015. Expectations for sales prices over the next 6 months accelerated by 6 points to 79 and the input cost expectations index rose by 4 points to 85.
Trade expectations remain challenging and suggest that the current circumstances affecting trade conditions will continue into the foreseeable future. The seasonally adjusted Trade Expectations Index (TEI) improved to 49 in April 2016 from 45 in March. Although all trade components are expected to improve into positive territory, employment prospects also improved but remained in negative territory. The possibility of further increases in interest rates, higher electricity costs, uncertainty on the volatile rand exchange rate and the sluggish domestic and world economy continue to weigh on trade conditions.
The employment situation in the trade sector showed some encouraging signs by improving by a further 2 points in April 2016 to 50 while the prospects for employment in the sector lifted as the sub-index rose to 46 from 40 in March 2016.