Executives more optimistic despite labour, graft fears

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Johannesburg - Domestic woes such as labour unrest and corruption are troubling chief executives of major local companies but a spark of confidence in their operations remained in the fourth quarter.

The Merchantec CEO Confidence Index released yesterday showed that the majority of chief executives were not bothered that investor sentiment from the EU would deteriorate, with 78 percent expecting that the expiry of bilateral investment treaties with European countries would not affect their companies in 2014.

This is even though the EU remains South Africa’s largest trade and investment partner.

Rick Irving, a member of the corporate finance team at Merchantec Capital, said having the Bric nations of Brazil, Russia, India and China as emerging trading partners for South African firms had an additional influence on their view about the Promotion and Protection of Investment Bill.

Research and advisory firm Merchantec Capital compiled the index from a survey of more than 1 000 top chief executives at JSE-listed companies and other major groups.

Although the chief executives thought costs associated with labour unrest and “unrealistic” black economic empowerment legislation changes might tarnish investor confidence, their sentiments were more positive when asked about growth expectations for their companies, with 49 percent foreseeing “moderately higher” growth next year and 10 percent expecting “substantially higher” growth.

The index showed the first consecutive quarterly increase in chief executives’ confidence since 2010. It rose by 3.9 percent to 55.3 index points in the fourth quarter from 53.2 in the third quarter. The technology sector gained the most, adding 11.1 percent to 56.9 points.

Confidence of chief executives increased by 6.2 percent to a score of 56.5 index points in the industrial sector and by 3.9 percent to 59 index points in the financial sector.

But chief executives in the consumer goods and basic materials sectors were rather downbeat and their confidence declined by 6.3 percent and 2.5 percent, respectively.

Consumer goods was the only sector where confidence was below the neutral score of 50 index points as companies cut spending.

It was also the only sector where chief executives’ confidence about the growth of their companies declined.

This did not come as much of a surprise since the FNB and Bureau for Economic Research consumer confidence index showed last month that even the festive season spirit was not improving consumers’ spending mood.

The latest retail sales statistics for September showed that growth slowed to 0.2 percent year on year in real terms. - Business Report

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