Sacob warns on Zimbabwe

BUSINESS confidence edged up last month, but the South African Chamber of Business (Sacob) says the modest pick-up may not point to a sustained upturn in the overall business mood. Sacob said it was concerned that the prolonged meltdown of Zimbabwe’s economy would eventually affect other countries in the region, including SA. “An inevitable global evaluation process might result in the political and social aspects gaining more prominence with unpleasant real effects for the economies of the region,” said Sacob. President Robert Mugabe’s government ordered retailers last month to slash the prices of basic goods in a bid to quash soaring inflation, triggering a wave of arrests of business executives — including South Africans — who did not comply fully. Dwindling supplies of staple necessities and a mounting crackdown on opposition in Zimbabwe spurred a growing exodus of refugees into neighbouring countries, particularly SA. “This was the main issue in July,” said Sacob economist Richard Downing. “We don’t want to climb on the Zimbabwe bandwagon, but there are people who must be looked after, and nothing is happening to address the issue. I think the state has a responsibility in this regard.” Sacob’s business confidence index nudged up to 99,6 last month after slumping to an 11-month low of 99,1 in June. Its average for the first seven months this year was 100,3 versus 101 in the first seven months last year. “Business confidence appears to be going through a soft landing as the tempo in household expenditure is slowing down and investment spending comes in as a welcome substitute to fill the void,” it said. But the business group warned the recovery may be temporary as a slowdown in real activity, apart from fixed investment spending, was likely to continue into 2008. The Reserve Bank is expected to raise lending rates again next week to curb robust demand for consumption and credit, which is adding to price pressures that have pushed inflation above its 3%-6% target range for three months in a row. The government’s infrastructure spending drive is boosting investment from both the public and private sector, and is expected to replace consumer demand as the economy’s main engine of growth in the coming months. Sacob also cited volatility in global financial markets — which were shaken by credit concerns again yesterday — as a concern. “Slowing global economic growth rates and a lower demand for commodities, could affect SA’s relative position more detrimentally than other emerging markets,” it said.