Advisory company Merchantec Capital’s CEO Confidence Index for the second quarter of this year has “shed light on the impact of artificial intelligence (AI) on business growth and operational optimisation within the ever-changing South African market”.

The company points out that while some businesses in South Africa have prioritised other areas of their business, most CEOs have provided insightful feedback on their active exploration of AI technologies.

This has been done to revolutionise their industries, boost efficiency, foster innovation and enhance the overall customer experience across South Africa.

As part of their global digitisation strategy, companies from various sectors are harnessing the power of AI to streamline processes and achieve unprecedented levels of efficiency, Merchantec adds.

Merchantec points out that one CEO remarked, “We use AI for target marketing, logistics planning and numerous other aspects of our operations. It has proven to be a game-changer in terms of precision and effectiveness.”

While embracing automation and cutting-edge technologies, South African businesses are keen to emphasise the importance of human touch and personal interaction.

Another CEO emphasised, “We are currently automated but have fail-safe procedures that are human-managed. Personal interaction remains key to building strong relationships and providing exceptional customer service.”

Overall, the Merchantec CEO Confidence Index recorded a 5% improvement between the first and second quarters of this year.

This is predominantly attributable to the basic resources sector, which underwent a dramatic turnaround in confidence between the first and second quarters of this year, with an overall increase in confidence of 45%.

In the first quarter, confidence in the basic resources sector suffered especially owing to financial and economic uncertainty caused by energy supply constraints.

CEOs across the raw materials industry believe current economic conditions in South Africa are better compared with six months ago, shown by a confidence increase of 18 points.

INDEX RESULTS

The basic resources segment of the index increased to a score of 56.67 as a result of an improvement in economic confidence in South Africa over the previous six months.

The results also show that technology recorded a decrease of 7% in confidence.

“It is worth noting that technology experienced a significant boom during the Covid-19 pandemic, as businesses rapidly adopted digital solutions to adapt to remote work and changing consumer behaviour.

"The sector has, however, now stabilised, facing challenges in securing debt or capital owing to recent interest rate hikes and repercussions of widespread retrenchments,” adds Merchantec.

Merchantec notes that these factors have contributed to a decrease in confidence levels within the technology industry, highlighting the need for careful financial planning and strategic decision-making in the current economic landscape.

Consumer goods also recorded an increase in confidence for the second quarter of this year, rising by 6% from 43.24 points to 45.88 points, remaining below the neutral score line.

This rise in sentiment was primarily driven by a 20% increase in confidence relating to the ability to secure debt or equity capital.

Financials also recorded a 3% decrease in confidence.

Merchantec states that this fall can be attributed to a 9% decrease in confidence relating to planned levels of investment in company business activities, and an 11% decrease in economic conditions.

Consumer services recorded the same score as the first quarter of this year.

Merchantec notes that industrials also decreased by 2%, as sentiment was primarily influenced by two factors.

“Firstly, there was a signficant 12% decline in confidence regarding industry growth expectations. This suggests a cautious outlook among industrial businesses regarding their future expansion and overall market performance.

“Secondly, there was a notable 13% decrease in confidence concerning the ability to secure debt and equity capital, likely aggravated by recent interest rate hikes.”

Merchantec also states that higher interest rates have made it more challenging for industrial companies to access necessary funding for their operations, leading to a decrease in confidence levels in the sector.

“These combined factors highlight the current challenges and uncertainties faced by the industrial industry, emphasising the need for prudent financial strategies and adaptability to navigate the evolving market conditions.”