Survey pegs CEO confidence in SA at five-year low

IN A sign that more job cuts might be looming in South Africa‚ the Merchantec Capital CEO confidence index‚ released on Thursday‚ fell to its lowest level since the 2008-09 recession.

The survey showed that uncertainty ahead of the May 7 national election‚ a weak rand and prolonged strikes had upset confidence.

The index fell to a five-year low of 51 in the first quarter of this year‚ from 55.3 points in the fourth quarter of last year.

The index compilers reported a drop in CEO confidence with regard to securing debt and equity capital for business activities — an indication that companies are likely to hold on to their money rather than spend it.

Almost 70% of CEOs said they expected a negative effect on their company should the rand remain at current levels.

Merchantec Capital research analyst Wushe Kundishora said “a cocktail” of factors had led to the CEOs’ negative outlook‚ including the rising price of fuel.

Adcorp labour market analyst Loane Sharp said small-business CEOs were “the most gloomy”.

“Many structural problems such as income tax and restrictive labour law will need to be reformed if we want confidence to improve over the long term‚” he said.

Free Market Foundation director Leon Louw said election uncertainty loomed large.

“There are many wild statements being bandied about‚ and there’s Julius Malema and the Economic Freedom Fighters in the mix‚” he said. “Who is contesting? Who isn’t contesting? Will we remain stable? All these questions are on the lips of CEOs.”

Of the five sectors considered in the survey‚ industrials suffered the sharpest decline‚ dropping from 56.5 to 49.3 points.

Mr Kundishora said the slow delivery of basic infrastructure was also a cause of frustration for CEOs‚ who have had to deal with continuing policy uncertainty and its implications for their businesses.

“In a nutshell‚ there will be lower growth and it’s unlikely that employment numbers will increase‚” Stanlib chief economist Kevin Lings said. - Colleen Goko, with Evan Pickworth. © BDlive 2014