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South African CEOs have diminished confidence in the economy's growth, the Merchantec CEO Confidence Index released on Wednesday shows.

The index weakened in the fourth quarter of 2012, dropping by 5.8 percent to an overall score of 52 points.

The basic materials sector experienced the sharpest decrease in confidence, falling by 16.2 percent following recent labour unrest.

Overall, sentiment decreased in all sectors, with the exception of the financial services sector, which increased in confidence by 4.5 percent.

Sixty-five percent of South African CEOs believed the country's 2013 Gross Domestic Product (GDP) figure would not exceed Treasury's revised 2012 growth forecast of 2.5 percent.

“This lack in confidence stems from South Africa's weakening business and investment climate, the slowdown in Asia's economic growth prospects and prolonged economic uncertainty in the Eurozone,” Rami Avivi, an associate at Merchantec Capital said.

The survey collates responses from over 150 CEOs, mostly from listed companies. It provides a leading indicator into how business heads perceive local market conditions and the economy.

Collectively, CEOs expressed concerns regarding the country's political instability and high levels of corruption, Avivi said. They were concerned about labour unrest and its potential to spread to other sectors.

The basic materials sector recorded a 16.2 percent drop in confidence for the fourth quarter of 2012, the largest decline in confidence for the sector to date.

CEOs were not confident with their companies' growth prospects.

There was a 27 percent decrease in confidence for planned company investment and a 22.2 percent decrease in confidence for the availability of debt capital.

Overall confidence in economic conditions decreased by 14.7 percent quarter-on-quarter, to a score of 41.2, the largest decline of all components of the index.

This negative sentiment was driven by CEOs in the basic materials, consumer services, industrials and technology sectors.

“Internationally, the continued uncertainty and slow recovery in Europe, South Africa's major trading partner, is having a dampening effect on local exports,” Avivi said.

Merchantec Capital is an independent corporate finance and research company and an approved, designated adviser and sponsor to AltX and JSE Ltd. -Sapa