Trade conditions should ease from September

SOUTH African businesses are expecting trade conditions to ease for the next six months and move into positive territory after the turbulence experienced in July and August.

The SA Chamber of Commerce and Industry (Sacci) yesterday said the momentum in trade conditions remained in negative territory in September.

Sacci said the Trade Activity Index (TAI) was at 39 points in September, below the 50 points mark that separates contraction from expansion.

The TAI was temporarily interrupted in July and dipped to its lowest this year at 34 points due to supply chain disruption during civil unrest, and recovered to 39 points in August.

Trade was severely hampered as thousands of businesses were vandalised, looted and burnt down in July during some of the most violent civil unrest in post-apartheid South Africa.

However, trade conditions appear to be recovering, albeit at a moderate pace, as the government has stepped in to restore order and lockdown restrictions have been eased.

Sacci said sales volumes improved but remained depressed, with new orders declining in September.

It said inventories and supplier deliveries remained relatively stable in September and this was expected to continue for the next six months.

Owing to turbulence in the trade environment, sales prices were more erratic and recently had declined, but sales prices were expected to increase at an accelerated pace over the next six months.

Expectations for sales volumes and new orders, however, were well into positive terrain, as the indices measured around 60 points.

Sacci said most respondents were expecting input costs to increase notably in the next six months, with municipal tariffs and rising fuel prices as major contributors to these increases.

Sacci senior economist Richard Downing said the uncertainty surrounding the Covid-19 lockdown restrictions and the effect on the economy was a contributing factor towards instability in the trade environment, particularly to entertainment, catering and accommodation.

“Respondents regard the slow pace of vaccination as detrimental to normalising trade activity.

“The application of law and order, and municipal service delivery, are causes of concern,” Downing said.

“The volatility of the rand exchange rate has been reported as complicating cross-border trade. Job losses were also indicated as affecting consumer demand at retail level.”

The issue of job losses was not surprising, as the rate of unemployment remains the highest it has ever been, with more than 580 000 people losing their jobs in the second quarter.

Downing said employment in the trade environment had remained in negative territory in September, and it was not expected to improve over the next six months.

The government will today provide an update on the support that has been extended to firms affected by the unrest.

So far, the Industrial Development Corporation and the National Empowerment Fund have collectively approved funding to more than 120 businesses to help businesses rebuild and sustain jobs.