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Cape Town - The majority of South Africa CEOs are expecting a material effect on their bottom lines in 2015 due to the constrained power supply from Eskom, according to the latest Merchantec CEO Confidence Index.
The index recorded that 58% of South African CEOs feel the lack of Eskom’s capacity will have a material effect on their business in the coming year. The remaining 42% are either benefitting from the business opportunity created by Eskom’s lack of capacity or are largely affected through the change in consumers’ purchasing patterns due to power outages.
"For the first time this year, South African CEOs see the current economic conditions in the country improving compared to six months ago," according to Merchantec.
"However, the South African economy is under pressure with the ongoing power supply crisis and its subsequent restraint on economic growth."
CEOs are expecting growth in the local market to remain flat in 2015 and are seeking out potential growth opportunities outside of South Africa.
South Africa’s economy relies heavily on the basic resources and industrial sectors which are heavily impacted by power outages.
CEOs in the remaining sectors - consumer goods, consumer services, technology and financial - commented on the increasing costs of doing business due to load shedding, with specific mention to acquiring, running and maintaining generators as well as the indirect costs of lost work time and disruptions in the flow of day to day work.
Many companies have made significant investments to ensure that they are self-sufficient and are feeling the rising cost pressures. CEOs also highlighted that regular load shedding has damaged the international perception of South Africa, with international investors perceiving an unstable and unreliable economy.
The CEO Confidence Index recorded a marginal quarter-on-quarter increase of 3.9% from 50.1 points in the third quarter of 2014 to 52.1 points in the fourth quarter of 2014.
CEOs across all the sectors indicated their increase in confidence relating to current economic conditions in South Africa, compared to six months ago, with a 16.0% increase from 38.3 points in the third quarter of 2014 to 44.5 in the fourth quarter of 2014.
CEOs' confidence in their ability to secure debt or equity capital for their companies also increased from 48.0 points to 49.6, representing a 3.2% increase. Confidence of CEOs relating to their own industry growth expectations recorded a decrease of 2.5% from 48.6 points in the third quarter of 2014 to 47.4 points in the fourth quarter of 2014.
Financials recorded the largest increase in confidence, rising by a significant 21.9% from 45.6 to 45.6 points, driven by a 34.2% increase in confidence relating to the current economic conditions, a 32.1% increase in confidence relating their ability to secure debt/equity capital and a 25.7% increase in confidence relating to their company growth expectations.
Consumer services recorded the second largest increase in confidence, rising 7.8% from a negative score of 49.4 in the third quarter of 2014 to above the neutral score line (50 points) to 53.2 points in fourth quarter of 2014.
The increase in sentiment was primarily driven by a 17.2% increase in confidence relating to economic conditions, an 8.1% increase in confidence relating to their planned level of investment in company business activities and a 6.8% increase in confidence relating to their company growth expectations.
Basic materials recorded the greatest decrease in confidence for the fourth quarter of 2014, dropping by 8.5% from 53.9 to 49.3 points.
The drop in sentiment was primarily driven by a 15.4% decrease in confidence relating to their industry growth expectation. This is a 12.7% decrease in confidence relating to their company growth expectations and a 10.9% decrease in confidence relating to their planned level of investment in company business activities.
