Trade conditions in South Africa remained constrained in October due to intensified power cuts, elevated inflationary pressures and rising interest rates, but showed signs of remaining stable in the coming months.
The South African Chamber of Commerce and Industry (Sacci) yesterday said 42% of businesses surveyed in October experienced subdued trade conditions.
However, Sacci said 58% of the respondents were positive about trade conditions for the coming six months.
Sacci said that high levels of load shedding in notably September and an unstable price environment, driven by higher fuel prices, had impacted inflation.
The chamber, however, said the rise in merchandise imports, export trade volumes, and tourist growth had softened the impact on the economy.
Sacci economist Richard Downing said conditions in general were difficult to predict in a turbulent market.
Downing said 59% of the respondents expressed positive trade expectations in October from low levels of 41% in February, 2022 and 47% in May, 2022.
“All components of trade activity remained unpredictable over the past 10 months, with the notable exception of input and sales prices that were maintaining increased levels. Present and expected supplier deliveries remain at a stable-level and less volatile,” Downing said.
“Inflationary pressures were intensifying over the 10 months to October with a concomitant monetary policy stance that became stricter.
“This notably left households in a difficult position as unemployment subdued salary and wage increases (being below the inflation rate) and the effect of business finding it hard to remain viable.”
The South African Reserve Bank has in October raised its benchmark interest rates by another 75 basis points to 6.25% per annum, as headline inflation stayed above the 3% to 6% target range at 7.6%.
Inflation in the country has been driven by rising fuel and food prices due to the ongoing war in Ukraine.
The Sacci survey found that operating costs were still rising, as 83% of the respondents experienced rising input prices/tariffs and 86% still see input prices increasing over the next six months.
Fuel prices, especially that of diesel, increased to its highest level ever of R27 at the pump – up by 48% year-on-year.
Sacci said the looming electricity tariff increases could further fuel the inflationary process.
Given the present restrained trade conditions, the employment sub-index was down by seven index points to 42 index points in October, from 49 points in August.
Notwithstanding tight trade conditions, 45% of the respondents in October still expected to employ more staff over the next six months.