Index: Confidence down among CEOs

Business confidence among captains of industry in Africa fell to its lowest level in nearly six years on the back of power shortages, drought and stringent visa requirements, the Young Presidents' Organization Global Confidence Index shows.

YPO is a nonprofit, global network of young chief executives. Founded in 1950, YPO member-run companies employ more than 15 million people around the world and generate $6 trillion in annual revenues.

South Africa is leading the pessimism charge, as labor issues and an unstable electricity supply continue to bite and drive negative sentiment on the continent.

The quarterly online survey, conducted in the first two weeks of July and released in the first week of August, gathered answers from 2,127 chief executive officers across the globe, including 181 in Africa.

The Index for Africa, which tracks CEO confidence levels in the region on a quarterly basis, slipped 3.2 points to 57.4, driven largely by a sharp drop in confidence in South Africa.

After rebounding 1.3 points in the first quarter of 2015, confidence in Africa now trails the global composite reading of 60.9 by 3.5 points.

Africa is the world's second-most pessimistic region, with only CEOs in Latin America less positive.

"African economies are being severely challenged by both internal and external factors. Slow growth, weak agricultural production and commodity prices, extremely high levels of unemployment and electricity supply issues, in many countries, particularly South Africa, are clearly having an impact on confidence amongst business leaders in the region," says Gabriel Malan, group managing director of Unlimited Group (Pty) Ltd and the chair of YPO's Africa region.

"CEOs across Africa will be looking for signs of growth and stability over the second half of the year and closely watching key economic indicators over the coming months as they plan for 2016."

Of the major African economies, South Africa, which has the highest weighting in the YPO survey, tumbled 5.1 points to 58.5, its lowest level since October 2009.

Kenya slipped 2.6 points; although with a score of 64.5, business leaders in the country remain firmly optimistic, the index noted.

Nigerian confidence climbed 2.3 points to 53.7, despite continued low oil prices. Zimbabwe also reported increased confidence, gaining 6.0 points to land at 48.5, although still in pessimistic territory.

Globally, the YPO Global Pulse Confidence Index slipped 0.6 point to land at 60.9, its lowest level since October 2013.

While not as bad as in Africa, business confidence in Asia dropped 1.6 points to 62.0 in the second quarter of 2015 as the plunging Chinese stock market and fears over a slowdown in the world's second-largest economy caused some jitters.

In China, despite the market volatility, business confidence fell only 1.5 points, from 61.2 to 59.7.

The decline in confidence was evident in all of the major economic regions, with the United States falling 0.5 point to 62.8 and the European Union slipping 0.9 point to 61.6.

Bringing up the bottom, in Latin America, confidence this year dropped 2.3 points from 52.4 to 50.1, after a steady decline since 2011. The drop was largely attributed to the 3.1-point fall in Brazil, the region's largest economy.

Confidence levels amongst African business leaders dropped across the survey's key indices - sales, employment and fixed investment.

Even so, there were still some signs of encouragement.

The YPO Global Pulse Sales Index for Africa dropped 1.0 point to 68.8, still an extremely positive reading.

Two-thirds of CEOs in Africa expected to increase revenues over the next year, with only 7 percent predicting a decline, the index showed.

There were, however, mixed feelings in regard to short-term expectations in the region.

Thirty percent of CEOs said business and economic conditions would improve over the next six months, 31 percent expected conditions to deteriorate, and 39 percent believed that conditions would remain the same.

The index also revealed that corporate corruption in Brazil, sanctions imposed on Russia, and the Chinese stock market turmoil continued to weaken confidence in the BRICS countries.

For China Daily

(China Daily Africa Weekly 08/07/2015 page22)