Business climate in South Africa worsened last month, as the Business Confidence Index (BCI), produced by the South African Chamber of Commerce and Industry (SACCI), fell to 90.4 points, losing 1.9 points compared to April and touching March’s 13-year low amidst renewed labour unrest. A total of six of the index’s 13 sub-indices weakened from April to May. Compared to May 2012, the BCI was by 2.4 points lower, as seven out of the 13 sub-indices improved y/y.

The deterioration of the business climate was caused mainly by socio-political events, including ongoing militant labour action, that had a harmful impact on the business mood and commercial and industrial activity levels and also distorted financial market performance, SACCI said in a statement. It expressed a concern about the fact that major economic sectors that have the ability to create employment, are contracting, while others are experiencing exceptional cost pressures resulting from rising labour costs and intermediary inputs like fuel, electricity and water prices that are increasing faster than the overall inflation rate.

Labour unrest has again become a sensitive issue in South Africa after a widespread wave of violent strikes in the second half of last year rattled the country’s economy. Tensions in the mining sector have grown amidst a running turf war between rival labour unions - the dominant National Union of Mineworkers (NUM) and the relatively new, but fast-growing militant Association of Mineworkers and Construction Union (AMCU), and also due to upcoming wage talks.