28 March 2012
The CEOs of South Africa’s top companies are upbeat about the country’s economic prospects, according to the lastest Merchantec CEO Confidence Index, which bucked the downward trend of the previous three quarters to surge by 20% in the first quarter of 2012.
The index, which surveys the views of over 100 of South Africa’s top CEOs on local market conditions and the economy going forward, registered its highest score – 65.6 – since its inception in the second quarter of 2009.
According to Merchantec Capital – an independent corporate finance and research company – this suggests that the economic fears which dominated 2011 may be dissipating.
“The European Central Bank’s liquidity injection into the Eurozone, as well as continued solid economic data coming out of the US of late, seem to be soothing fears relating to the credit crunch and contributing to growing the sentiment towards stability”, Merchantec said in a statement on Wednesday.
Mining confidence surges
“The South African Reserve Bank also appears upbeat on the South African economy, with figures reflecting substantial acceleration in government and household spend.”
South Africa’s basic materials sector, which includes the mining sector, recorded a 19% increase to a score of 68 on the index, the highest score across any sector.
“This comes as no surprise considering low interest rates, continued high commodity prices and the government’s indication that the nationalisation of mines will not be pursued,” Merchantec said.
Further evidence of optimism within South Africa’s mining sector was “a 33% leap in sentiment towards economic conditions and a 140% surge in confidence in their ability to obtain debt or equity capital”.
State infrastructure plan welcomed
55% of CEOs across all sectors said they were confident in the ability of the 2012 National Budget to maintain macroeconomic stability in South Africa and to support enterprise and job creation.
In particular, the country’s industrials sector, which includes construction, responded favourably to the planned increase in infrastructure spend detailed in Finance Minister Pravin Gordhan’s 2012 National Budget by registering a 22% increase to a score of 65.6.
South Africa’s financial sector, notwithstanding a 12% increase to a score of 66.3, recorded the lowest rise in confidence the first quarter.
“This increase may have been tempered by persistent wariness of other similarly highly indebted Eurozone countries, such as Greece, requiring similar debt swaps, as well as renewed concerns about China’s growth outlook,” Merchantec said.