(Updates with comment from chamber of commerce economist in third paragraph.)
June 8 (Bloomberg) -- South African business confidence fell to the lowest in 10 months in May, undermining the recovery in Africa’s largest economy as investment slows, the country’s Chamber of Commerce and Industry said.
The Business Confidence Index declined to 85.8 from 86.9 in April, the Johannesburg-based chamber, known as SACCI, said today in a statement on its website. The index is compiled from 13 economic indicators, including retail sales, inflation and financial gauges, such as the stock index and the currency.
“Our environment, if you talk globally and locally, it’s not very conducive for doing business or investing,” Richard Downing, an economist at the chamber, said in a phone interview from Johannesburg today. “We are not sure growth will continue like it was. The recovery isn’t established yet.”
While economic growth accelerated to an annualized 4.8 percent in the first quarter, the rate of expansion may not be sustained in the second quarter. Vehicle sales rose the least in 17 months in May, an industry group said on June 2. The purchasing managers’ index for May eased for the third consecutive month, Kagiso Securities Ltd. said on June 1.
The RMB/BER index, another business confidence measure, fell the most in a year in the second quarter as rising food and fuel prices curbed consumer spending, Rand Merchant Bank said yesterday.
Lower export volumes had the largest negative effect on the BCI, followed by import volumes, new vehicle sales and retail sales, SACCI said.
While it welcomed the approval of South Africa’s Competition Tribunal of a bid by Wal-Mart Stores Inc. for a controlling stake in Massmart Holdings Ltd., the “undertone” of the hearings were a concern, SACCI said. Opposition to the investment from some in the government and labor unions may damage business and investor confidence, it said.
The tribunal on May 31 ruled the world’s biggest retailer can proceed with its 16.5 billion rand ($2.4 billion) purchase of a 51 percent stake in Massmart on condition no jobs are cut for two years. South Africa’s government had warned the acquisition could lead to job losses and that imports may take business away from local producers.
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