The confidence of CEOs of listed, large private and multinational companies in South Africa recorded a 7% increase in the third quarter of this year, rising to a score of 55.0, according to the Merchantec CEO Confidence Index.
This quarterly copyright report which collates the views of CEOs of listed, large private and multinational companies in the country noted that this improvement reflected a cautiously optimistic outlook among South African business leaders, spurred by positive developments in the formation of the business-friendly Government of National Unity, and the recent reliable electricity generation.
However, CEOs realise there is still a lot of work to be done to reduce Government spending and inefficiencies, interest rates, crime and policy uncertainties.
Looking ahead, the majority of CEOs anticipate a gross domestic product (GDP) growth rate of 1.5% for 2025, which aligns to the South African Reserve Banks forecast GDP growth rate.
“Despite economic, governmental, and regulatory challenges, there is an underlying hopeful sentiment for significant advancements in governance and infrastructure to support economic development,” the report notes.
Overall, 65% of CEOs perceive current economic conditions and industry growth expectations to be moderately to substantially better compared to six months ago, while 68% of CEOs also have moderately to substantially higher growth expectations for their company.
The rise in confidence among business leaders is positive as it is likely to drive higher levels of investment in areas such as capital expenditure, personnel expansion, acquisitions and more.
Merchantec Capital is an independent equity and debt sponsor, mergers and acquisitions specialist, valuations expert, research and corporate governance advisory company.
Its sector-specific insights showed that industrials increased by 7% which was primarily driven by a 25% increase in perceived economic conditions and a 10% increase in confidence relating to company growth expectations.
Financials recorded the largest increase in confidence at 23% moving to a score of 71.14 points. The increase in overall confidence was primarily driven by an increase in perceived economic conditions and industry growth prospects.
Information Technology increased by 8%. The increase in overall confidence was primarily driven by a 39% increase in perceived economic conditions and a 23% increase in planned levels of investment.
Consumer Discretionary recorded the second largest increase of 22%. The increase in overall confidence was driven by increases in contributing individual components of the index namely, 65% increase relating to improved economic conditions, increase in industry growth expectations by 39%, company growth expectations by 12% and in planned level of investment by 14%, despite confidence in the ability to secure debt or equity capital remaining flat.
Consumer Staples went up to a score of 61.67 seeing a 4% increase in overall confidence supported by stable demand for essential goods and improved supply chain efficiencies.
Health Care went up by 6% despite a 37% drop in confidence relating to industry growth expectations. The primary area of concern is due to challenges including regulatory hurdles and cost pressures.
Materials recorded the third largest increase in confidence at 21% moving to a score of 64.44 points. The increase in overall confidence was primarily driven by a 77% increase in industry growth prospects.
Communications Services recorded the only decrease of 4%, despite still being the most confident sector overall at 81.23 points.
Real Estate saw an 18% increase which was predominantly driven by a 25% increase in confidence relating to economic conditions.
Professor Raymond Parsons, a professor of economics at the North-West University Business School, said much higher job-rich growth would require South Africa to stay on the right economic track and to capitalise on the incipient recovery.
“It is a great opportunity for SA to do things differently and better. This includes expediting growth-friendly economic reforms and projects, as well as boosting necessary infrastructural spending in collaboration with the private sector,” Parsons said.
BUSINESS REPORT