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CEO confidence decreases further in Q3

CEO confidence decreases further in Q3

Photo by Reuters

2nd September 2015

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

  

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International advisory firm Merchantec’s CEO Confidence Index fell to 42.2 points in the third quarter of the year, compared with 45.4 points in the second quarter, remaining below the neutral 50-point level.

This is the lowest score recorded in the Merchantec CEO Confidence Index since its inception in the second quarter of 2009, when it dipped to 42.

The decrease in the overall confidence among CEOs in South Africa was demonstrated by a drop in confidence across all sectors, including basic resources, industrial, financial, consumer goods, consumer services and information and communication technology.

CEO confidence relating to the current economic conditions, compared to six months ago, dropped by 5% from an already negative score of 32.3 points to 30.6 points, with the largest decrease recorded among CEOs in the consumer services sector.

Of the 50% of CEOs pursuing expansion in Africa, 44% were expanding close to home in other Southern African countries, while 26% were looking to West Africa and 26% looking to East Africa. North Africa was the least attractive region for CEOs, with only 4% starting up operations in the region.

The Merchantec CEO Confidence Index showed that 6% of South African CEOs already had operations running across the continent.

CEOs who were exploring expansion strategies in Africa commented on the presence of Chinese-owned companies operating throughout the continent and the difficulty in beating the lower prices set by their Chinese competitors.

Other difficulties mentioned included language barriers, skills shortage, risks relating to nonpayment, red tape around laws and licensing and striking a balance between profitability for the company and affordability for African consumers.

The remaining 50% of CEOs who were not actively pursuing African expansion strategies were either unable to do so owing to their companies currently being in survival mode or looking to expand offshore.

Meanwhile, the largest decrease in CEO confidence related to the planned level of investment in business activities, which dropped by 9.4% from a positive score of 54.9 points in the second quarter to 49.7 points in the third quarter, again below the neutral 50-point level.

This was primarily driven by CEOs in the basic materials sector with a decrease of 30% in confidence relating to their planned level of investment in business activities, from 50 points in the second quarter to 35 points in the third quarter.

The only sector to record an increase in confidence relating to the planned level of investment in business activities was the industrials sector, increasing marginally by 3% from 45.8 points in the second quarter to 47.2 points in the third quarter.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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