Business confidence was close to its highest ever level in July, the SA Chamber of Business said on Thursday.

Sacob's Business Confidence Index (BCI) for July was at 129, just 1.9 points below the record level of 130.9 achieved in September 2004.

"This is not only the highest level this year but is continuing the renewed rising trend from January 2005 after business confidence slowed during the last few months of 2004," Sacob said in a statement.

The main movers of July's BCI were the volume of merchandise exports, share prices and unexpected lower inflation.

"Sacob appreciates the fact that the openness of the South African economy seems to be an advantage as not only foreign trade, especially merchandise exports, stand to benefit, but so do investment flows," the organisation said.

"There seems to be a welcome switch with the economy becoming more export led at this juncture, with domestic demand losing some of its impetus."

Sacob said it always maintained that a reasonably priced rand could further initiate the export led revival. The rand depreciation clearly plays a significant role in the rand price of commodities as it does with other exports.

It said it was glad to note that the export of manufactured goods increased in the first six months of 2005. "This suggests that the manufacturing sector remains globally competitive and can even improve on this performance if the rand maintains a reasonable exchange rate."

Sacob said given the large part the input of petroleum products plays in conducting business, the higher cost of fuel will have a detrimental effect on the prices of products.

"Sacob doubts whether the fuel price effect on inflation has been fully accounted for, while the effect of relative price changes of fuel since 2000 are not reflected in the weights of the Consumer Price Index (consumer inflation) or the Producer Price Index (producer inflation)."

The organisation said however, that it believed that immediate challenges that needed timeous action included containing the higher liquidity in the economy — which came about from substantial financial inflows — and managing the effects of the current high fuel price.

Sacob said it regarded the land reform issue an imperative for investor confidence, as property rights were pivotal to investment decisions.

"Urgent clarification on this issue is therefore needed."

Sapa

SA economy South Africa is the economic powerhouse of Africa, with a gross domestic product four times that of its southern African neighbours and comprising 25% of the entire continent's GDP.

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