Is South Africa economically sustainable?
A new confidence Index reveals that as many as 63% of top CEOs believe that South Africa Inc is on its way to becoming economically unsustainable.
The Merchantec CEO Confidence Index cites government inefficiencies, corruption, red tape, skill shortages and unions as the main reasons for the country’s economic stagnation.
The index collates responses from over 1,000 top CEOs, in SA primarily from the listed environment.
It noted that confidence in the financial sector dropped by 17.2%, which is mainly attributed to the collapse of micro-lender, African Bank Investments Limited.
However, there was a marginal overall quarter-on-quarter decrease of 2.4% from 51.4 points in Q2 2014 to 50.1 points in Q3 2014.
A separate index published by the SA Chamber of Commerce and Industry (Sacci), found that business confidence recovered in August, but is still below the August 2013 levels.
CEO confidence index Q2 2014
The Sacci Business Confidence Index (BCI) recovered by 1.1 index points to 89 in August 2014, compared to the 90.5 level in August 2013.
“The BCI is moving in a narrow band around the level of 90, with an average of 90.4 in the first eight months of 2014,” Sacci said.
During the first eight months of 2013, the BCI averaged 91.4.
“There are indications that the BCI may have bottomed out, but the sub-indices reflecting key economic activities will have to perform more strongly on a continuous basis in order for improvements in business confidence to gather pace.”
Sacci said business confidence had to be supported by convincing signs of improvement in real economic activity and the easing of labour unrest brought the promise of normality to the economic environment.
Merchantec found that confidence in the Financial sector dropped from a score of 55.1 points for Q2 2014 to 45.6 points for Q3 2014.
Confidence in the Consumer Services sector also recorded a decrease, dropping by 10.8% from 55.4 points in Q2 2014 to 49.4 points for Q3 2014.
The Index further reported a decrease in confidence in the Industrials and Technology sectors of 4.9% and 2.3% respectively.
CEOs across all the sectors indicated their decrease in confidence relating to current economic conditions in South Africa, with a 7.8% decrease from 41.6 points in Q2 2014 to 38.3 for Q3 2014.
CEO’s confidence in their ability to secure debt or equity capital for their companies also decreased from 50.1 points to 48.01, representing a 4.2% drop.
Confidence of CEOs relating to their own company prospects and industry growth expectations also recorded a decrease of 3.6% and 0.8% respectively.
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