AGI Barometer: Business confidence dips further

Economic activities in Ghana remain weak as businesses continue to grapple with numerous challenges.

According to the latest report of the Business Barometer issued by the Association of Ghana Industries (AGI), business confidence dropped from 97.29 points in the fourth quarters, reflecting a dip in confidence.

The report revealed that 96 percent of businesses in Ghana found the cost of electricity un­duly high and its supply woefully inadequate.

Chief Executive Officers of organisations who were captured in the report said high cost of electric­ity and inadequate power supply were two topmost challenges that bedeviled their operations in the last quarter of 2015.

These had a scathing effect on the operations of businesses across the length and breadth of the country.

Business Finder has however found that poor power supply run through­out all four quarters of the year followed closely by exchange rate volatility, multiplicity of taxes and poor access to credit.

The report further re­vealed that small and medium sized businesses were affected first by high cost of electricity and sec­ondly poor supply of power.

The Business Barome­ter expresses the state of the business confidence as an index, with 100 as the base index and is calcu­lated out of “current” busi­ness mood and “expectations” for the fu­ture.

Large scale businesses were the hardest hit by the unreliable supply of power followed by the high cost of electricity, the report said.

In terms of business performance, the paper found out that the 60 per cent of CEOs whose busi­nesses performed poorly in the third quarter of 2015 increased to 76 per cent in the fourth quarter of the year, reflecting the deteri­oration in business confi­dence.

It is interesting to note that AGI’s survey for the first and second quarters of 2015 revealed that 82 and 80 per cent respec­tively of businesses per­formed poorly.

This means business prospects worsened within that period, stabilized slightly as confidence saw a marginal rise then dipped again in quarter three.

Business Finder re­ported last week that some businesses were still lay­ing off staff through re­structuring exercises.

The paper gathered that the increases and introduc­tion of new taxes, utility tariff hikes had compelled most firms to re-strategize in order to cut costs and remain in business.

Commenting on the trends, Policy Research Officer of the AGI, John Defor told this paper the responses received from business operators was a reflection of the de­clining business confi­dence.

According to him, some factors that ac­counted for the subdued confidence included the utility tariff hikes an­nounced in December 2015 as well as forex regulations issued by the Bank of Ghana (BoG) os­tensibly to arrest the falling cedi.

Mr Defor explained that it was normal for businesses to restructure their operations and make do with what they think is extremely necessary.

“Generally when the economy gets tougher for people, one of the ways out is to re-strategise and they look at areas they can plug out,” Mr Defor added.

With inflation hitting 19 per cent and the local currency at over ?4.0 per dollar, economic activ­ities are not likely to pick up anytime soon.

This means business confidence is bound to plummet some more as businesses continue to pay more for fuel, elec­tricity, water and other services.

The BoG’s Monetary Policy Committee at its first sitting this year noted that “there are risks to the growth outlook. These include, continu­ing tightness in the mon­etary and fiscal policy stance, weak consumer confidence, falling com­modity prices and a slack in global growth.”