The South African Chamber of Commerce and Industry (Sacci) says the lead-up to the national and provincial elections on May 29 had a notable effect on business confidence during April and May, with the Business Confidence Index (BCI) having dropped by 5.8 points in April to 108.9 and further to 107.8 in May.

The recovery of the 6.9-point decrease over the two months will largely depend on the formation of a new government.

Political developments are of special concern given their potential effect on economic policy and the business climate, Sacci states.

“The recent Parliamentary and provincial elections had an insightful outcome, implying a change in the political guard.

“This adjustment could have unwarranted and unintended consequences for the economy and the wellbeing of South African citizens. Political stability and policy certainty will be fundamental assurances that drive business and investor sentiment,” Sacci explains.

The chamber reports that three subindices negatively impacted on the business climate in May, while three neutral and eight positive effects were noted in the other subindices.

The main positive impacts came from merchandise export volumes and new-vehicle sales, but a decrease in overseas tourists and lower merchandise import volumes weighed on business confidence.

Sacci adds that positive effects also came from the higher global price of precious metals and lower inflation in the year to May.

Real economic growth nonetheless slipped below 1% to 0.5% in the first quarter of the year, after measuring 1.4% in the fourth quarter of 2023.

Primary sector output declined by 1.7% year-on-year in the first quarter of the year and secondary output declined by 1.4% year-on-year. The tertiary sector, however, had 1.1% higher input year-on-year in the first quarter.

Sacci says South Africa has an opportunity and duty to set the economy on a road to recovery through responsible and accountable governance.

“The public and private sectors, as well as citizens, should exercise their respective duties and abilities in line with the Constitution and sound economic values and perspectives.

“The political deviousness of parties during the election process should give way to pragmatism and reality that serve future economic improvement, performance, prosperity, and inclusiveness,” it adds.