The sentiment from CEOs in our 4th Quarter CEO Confidence Index is a clear echo of the current trading environment faced by business owners. High crime levels, fueled by the excessive unemployment rate was a concern with many noting that business activity is being crippled with improper business dealings via corrupt tenders, slow paced service delivery and unethical usage of taxes. Continued power and water outages are pushing businesses to their limit financially, making normal operations extremely expensive as companies have increased costs for independent power generation.
Inflation is also a headline in most news articles across the world, as inflation reached 40-year highs in most leading economies. While inflation in South Africa has somewhat subsided, it remains a concern among local CEOs. 53.4% of CEOs expect inflation to peak in the first half of 2023, while the balance of 46.6% only expects inflation to peak during the second half of next year.
Over the 3-month period from Q3 to Q4, the Merchantec CEO Confidence Index recorded a quarter-on-quarter decrease of 4% from 54.6 points in Q3 to 52.6 in Q4 slightly above the neutral score of 50. CEO confidence, across all sectors, in the current economic conditions dropped by a significant 13%, with the largest decrease demonstrated by CEOs in the Basic Resources sector with a 45% decrease in confidence relating to current economic conditions.
Basic Resources recorded the greatest decrease in confidence for the fourth quarter of 2022, dropping by 8% from 54.17 to 50 points.
Technology recorded the same level of overall confidence in Q4 as in Q3, at 58points. The sentiment was primarily driven by a 5% increase in confidence relating to more positive economic conditions and a 5% increase in the planned level of investment, while confidence relating the debt/equity component remained the same, Industry growth (-5%), and Company growth expectations (-5%) decreased over the previous quarter.
Consumer Services saw a 5% drop in confidence with a score of 43.57 from 45.94 in Q3 of 2022. The sentiment was primarily driven by a 18% decrease in confidence relating to a negative investment outlook.
Consumer Goods saw a slight drop in confidence by 4%. The uncertainty in company growth expectations contributed significantly to the decline in sentiment, which was down 8%.
Financials also saw a 5% drop to a score of 56. This fall in confidence can be attributed to a 16% decrease in confidence relating to their ability to secure debt or equity capital in the Financial sector.
Industrials were the most confident in this quarter. Although confidence in this sector remained unchanged, it saw an 18% increase in anticipated investment in company business activities.