Business News of 2014-02-05

Business confidence dwindles — AGI survey

The Association of Ghana Industries (AGI) has described 2013 as a bad year for businesses operating in the country, as confidence level in the business environment dwindled significantly in the last quarter of the year under review.
Confidence level per its Business Barometer Indicator (BBI) dropped to 26.7 in quarter four of 2013, compared to 40.8 in quarter three of 2013, implying a significant loss of confidence in the business environment.
BBI defined
The BBI is a tool that measures the level of confidence in the business environment and predicts short-term business trend. It also expresses the state of the business climate numerically as a figure that ranges between +100 and –100 and is calculated out of “current” business mood and “expectations” for the future.
Per the BBI for quarter four, optimism level about the first quarter of 2014 also dropped significantly, compared to expectations in the third quarter of 2013.
About 55 per cent of the 300 company executives who responded to the survey, based their optimism on high market prospects, increased purchasing power and available human resource compared to 66.7 per cent in quarter 3 of 2013.
Pessimism about the first quarter of 2014 shot up from 1.3 per cent in quarter three to seven per cent in quarter four, with pessimistic CEOs citing high utility tariffs, high cost of raw materials and the declining fortunes of the Cedi as reasons for the worse expectations.
The Chief Executive Officer of the AGI, Mr Seth Twum-Akwaboah, expressed concern about the low expectations in quarter four as well as the drop in the BBI indicator.
“Expectations in quarter three were better than quarter four. If the Business Barometer Indicator drops, there must be concern as to what is happening in industry,” he said.
Fourth quarter findings
Presenting the fourth quarter 2013 findings of the AGI Business Barometer, which captures the prevailing business mood and expectations of chief executive officers (CEOs), the AGI CEO also said access and cost of credit remained a topmost challenge to the business community.
The two issues, he said, run concurrently as high cost of credit makes access to it impossible, and the inability for businesses, especially small and medium enterprises (SMEs) to get funding meant that they could not expand their operations and become competitive.
Whilst access to credit remained the key concern to the SMEs, depreciation of the cedi, high utility tariffs and taxes continue to make industry players less competitive.
Sectorial views
On sectorial challenges, the agricultural sector identified access to credit, high cost of credit and high cost of inputs as the top three factors limiting the players to provide food security and raw materials to feed the manufacturing sector.
In the construction sector, lack of contracts, low access to credit and delayed payments for work done were the limiting factors to expansion.
Operators in the manufacturing sector cited high utility tariffs, high cost of credit and access to credit as factors stifling growth.
The repeated mention of access to credit and cost of credit in the surveys conducted over the years is an indication that not much was being done to provide solutions to enable companies borrow at lesser cost to expand their operations.
The President of the AGI, Mr James Asare-Adjei, explained that once the BBI fell, it means that businesses lost confidence in the business environment hence the need for more efforts to address challenges brought to the fore by the survey.
2013 Challenges
In the year under review, the country experienced a number of incidents that made the business environment and the general confidence in the economy wane.
One of the major incidents was the election petition which forced investors to adopt the wait-and-see attitude; a situation which affected the inflow of foreign currency to boost the economy and to the get the local currency stable.
Another issue that affected the economy and businesses was the unavailability of stable electrical power (dum so dum so) which affected the industry and businesses in general. This is because they had to spend more outside their budget to power generators at a higher cost. In some instances, some had to lay off workers to be able to maintain their budgets.
The year was also one that witnessed a massive depreciation of the cedi against the major foreign trading currencies including the US dollar.
The cedi was estimated to have dropped by 20 per cent during the year under review. Although it favoured Ghana’s exports, importers were found wanting.
In a country where majority of what is consumed is imported, it obviously means that the more the cedi depreciated, the worse the economic situation became.
Industry is optimistic about the first quarter of the year. However, it is expected that the managers of the economy will put pragmatic policies in place to ensure that monies generated for development are channelled into tangible projects for society to feel the impact.
It is also expected that the corruption in the system would be brought under control.
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