The level of confidence among South African CEOs weakened in the second quarter, with top executives expressing concern over the impact of unsecured lending on the economy, labour unrest, wage demands and the depreciation of the rand.

The Merchantec CEO Confidence Index decreased by 9.5% to 52.4 points, with the basic materials sector seeing the greatest decrease in confidence, followed by the technology sector.

According to the survey, which canvasses over 200 CEOs, mainly from the listed environment, 67% of CEOs anticipate that the extent of unsecured lending would negatively affect the South African economy in 2013.

While it was noted by some CEOs that a tightening of overall credit extension would have a negative impact on the economy, there was a fair amount of uncertainty in relation to the timing thereof.

Some CEOs indicated that the banking sector would implement measures to ensure that lending practices were more sustainable, and that the exposure of the big banks to unsecured lending was not so significant as to affect operations. Smaller micro lenders, by nature, had a greater exposure to the negative impacts from unsecured lending.

CEOs also indicated that the current political climate was not favourable for economic growth and that the negative current account balance, which widened to R15.02-billion in April, and the depreciation of the rand were of concern.

Labour unrest and double-digit wage increase demands were also expected to have a negative impact on economic confidence, growth and investor sentiment.

Confidence among executives in the basic materials sector fell by 28.3% from 59.4 to 42.6 points, driven by a 35.7% decrease in confidence in relation to industry growth expectations and a 33.8% decrease in confidence in relation to the ability to secure debt/equity capital for business activities. Merchantec said the decrease in confidence could be attributed to strike action and soaring wage increase demands, which were said to drive investment away from the sector.

Overall confidence decreased across all sectors with the exception of the consumer goods sector, which showed an increase of 9.1% from 50.8 to 55.4 points and the industrials sector, which showed a marginal increase of 0.4%.

Overall confidence in industry growth expectations decreased by 14.6% quarter-on-quarter, to a score of 48.4. The negative sentiment relating to industry growth was driven by CEOs representing the basic materials, technology, consumer services, financials and industrials sectors. Conversely, confidence in relation to industry growth expectations increased for the consumer goods sector, as retail spend remained strong.