World Wide
South African Business Confidence Hits 10-Month Low Amid Political Uncertainty
South African business confidence drops to 10-month low at 107.8 amid political uncertainty and coalition negotiations.
Key Takeaway
- South African business confidence fell to a 10-month low of 107.8 in May, down from 108.9 in April.
- Political uncertainty rises as the ANC loses its parliamentary majority, necessitating coalition negotiations for a new government.
- SACCI urges an "economy first" approach to mitigate economic risks and promote sustainable growth amid high unemployment.
Business Confidence Decline
South African business confidence has dropped to a 10-month low, according to the South African Chamber of Commerce and Industry (SACCI). The sentiment index fell to 107.8 in May, down from 108.9 in April and 114.7 in March. The average level of the index for the first five months of 2024 was 111.7. This decline in business confidence comes amid political uncertainty as the country approaches its May 29 election. SACCI emphasized the need for politicians to adopt an "economy first" approach as they negotiate the formation of a new government.
Political Uncertainty
The recent election has resulted in the African National Congress (ANC) losing its parliamentary majority for the first time since it came to power in 1994. This has forced the ANC to negotiate with rival parties to form a broad alliance, known as a government of national unity. Parliament is set to reconvene on Friday to elect the president. SACCI warned that this political adjustment could have "unwarranted and unintended consequences for the economy and the well-being of South African citizens." The organization stressed that an "economy first" approach is essential to reduce high levels of unemployment and build a meritocracy with sustainable and inclusive economic growth.
Coalition Negotiations
Several parties have shown interest in joining the new government. Among them is the centrist Democratic Alliance. The ANC has also reached out to various parties, including the leftist Economic Freedom Fighters and former President Jacob Zuma’s uMkhonto weSizwe Party. Both of these parties have pledged to nationalize land and the central bank. The formation of a coalition government is seen as a critical step in stabilizing the political landscape and addressing the economic challenges facing the country.
Management Quotes
- South African Chamber of Commerce and Industry (Sacci):
"This adjustment could have unwarranted and unintended consequences for the economy and the well-being of South African citizens. An ‘economy first’ approach should reduce high levels of unemployment and build a meritocracy with sustainable and inclusive economic growth."
