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Boost In South Africa’s Business Confidence Index

James Boston
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Boost In South Africa’s Business Confidence Index

Business Confidence is starting to pick up again in South Africa following a series of economically destructive industrial relations disputes that afflicted the country for much of the first half of this year. The Business Confidence reading for Q3 is now showing at 46.0, up from the previous showing of 41.0 and surprising analysts who had been anticipating this indicator to fall further towards 36.5.

The African continents second largest economy had a near miss with recession recently, the second quarter GDP growth figure came in at just 0.6% and following quarter one’s contraction a technical recession looked probable. Growth of 4.9% in Agriculture and 1.5% in Financial Services were easily offset by a shrinkage of -9.4% in the crucial Mining sector, the strike hit mines also caused a raw material shortage in the Manufacturing sector which was forced to post a contraction of -2.1%.

Adding to South Africa’s economic concerns is the recent publication of the Global Competitiveness Survey by the World Economic Forum (WEF), the latest edition of this annual report shows that the country has fallen three places from 53rd to 56th in the world competitiveness rankings. Out of 144 countries included in the survey South Africa ranked in last place in the category of Labour-Employer relations. Although scoring highly in many other important categories the challenging industrial relations landscape in South Africa is discouraging to international investors, furthermore as evidenced by the strikes this year it is causing real damage to the otherwise growing economy.

The latest update on the South African economy from Morgan Stanley sees growth forecasts significantly cut back for the year. The current projection is for a GDP growth rate of just 1.3% for the full 2014 year, this represents a downward revision of 0.5%, similarly the 2016 growth rate has been cut from 2.8% to just 2.5%.

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