The Q2 2025 Merchantec CEO Confidence Index reveals a near-flatline in overall CEO sentiment, inching up from 45.2 in Q1 to just 45.3.
Confidence has bottomed out at these levels, underscoring the enduring pressure on South African corporate leaders amid persistent economic turbulence.
Meanwhile, 75% of CEOs support the SARB’s proposal to lower the inflation target to 3%, viewing it as a key lever to reduce debt-servicing costs and restore macroeconomic stability.
This strong backing comes even as the business environment grapples with sluggish growth, rising unemployment, and entrenched structural inefficiencies.
With South Africa’s economy projected to grow by just 1,1% in 2025, the outlook remains challenging following a weak first quarter marked by contractions in mining, manufacturing, and utilities.
Load shedding has resurfaced, business closures are mounting, and unemployment has climbed to 32,6%. Against this backdrop, CEOs are increasingly vocal about the urgent need for credible economic reform and greater policy certainty.
Support for the SARB’s proposal is strongest in the Industrials, Financials, and Information Technology sectors, where CEOs believe it could help boost investor confidence, reduce borrowing costs, stabilise the rand, and align the country with international monetary standards.
However, CEOs in Consumer Staples, Utilities, and Health Care sectors expressed caution, warning that tighter monetary policy could stifle demand in an already fragile economy.
While many acknowledged the long-term benefits of lower inflation, they stressed that external forces such as global commodity prices and currency volatility limit SARB’s influence.
Several CEOs also emphasised that without addressing inefficiencies in state-owned enterprises, corruption, and public overspending, the policy risks doing more harm than good.
Other concerns included the potential drag on growth from higher interest rates and the lack of infrastructure and regulatory readiness to support such a shift.
In summary, while there is strong CEO backing for the proposed inflation target adjustment, the message is clear: it must be embedded within a credible and holistic economic reform agenda to truly restore confidence and unlock long-term growth.
Sector-specific insights include:
- Consumer Discretionary recorded a 43% increase in confidence regarding economic conditions and a 22% rise in investment sentiment. Company growth expectations improved by 8%, while industry growth dipped slightly by 8%. However, confidence in access to debt or equity capital dropped sharply by 100%, indicating a complete loss of confidence in funding availability.
- Consumer Staples experienced a 19% decline in confidence regarding economic conditions and a 14% drop in industry growth expectations. Company growth sentiment fell by 4%, while access to capital improved by 5% and investment sentiment rose by 8%, suggesting cautious optimism despite macroeconomic concerns.
- Financials showed broad-based improvement across all categories. Confidence in economic conditions rose by 10%, industry growth by 8%, and company growth by 9%. Access to debt/equity capital improved significantly by 25%, and investment sentiment increased by 26%, reflecting renewed optimism in the sector.
- Health Care saw a slight improvement in sentiment, with better scores in investment and company growth expectations. The sector appears to be regaining some stability after a modest decline in Q1.
- Information Technology maintained steady confidence levels, with gains in capital access and investment sentiment offsetting minor declines in economic outlook. The sector continues to benefit from its resilience and innovation-driven growth.
- Industrials showed signs of cautious optimism, with improved company growth expectations and investment sentiment. However, confidence in economic conditions and industry growth remained subdued.
- Utilities experienced a significant decline in confidence, particularly in economic conditions and industry growth. Persistent infrastructure challenges and regulatory uncertainty continue to weigh heavily on sentiment in this sector.
- Materials remained largely unchanged from Q1, with sentiment still dampened by weak economic conditions and limited investment appetite.
- Real Estate presented a mixed picture while investment sentiment improved, concerns over economic conditions and capital access continued to suppress overall confidence.