Survey: Uncertainty Affecting Business Confidence in Africa

Obinna Chima
The growth of African businesses is being hampered by uncertainty despite improving economic conditions, according to a survey of finance professionals around the world.

The Global Economic Conditions Survey (GECS) for the third quarter of 2014, which was jointly carried out by the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA) revealed this.
According to the survey, the biggest underperformer in the quarter was Nigeria, hit hard by both falling oil prices and some of the first confirmed Ebola cases, prior to the virus being declared contained in late October.

Nigeria was followed by Botswana, which was held back by a combination of power shortages, pre-election uncertainty and falling mining output. Underperformance was also evident in DR Congo, where falling copper prices and other factors (including a separate Ebola outbreak) have impacted business sentiment.

Globally, the GECS found that business confidence in the real economy and capital spending were both hit directly.
The report noted that access to growth capital in the region received a boost and cashflow improved, making new investment opportunities accessible. The survey also found that opportunities for organic growth did not recover strongly, but at least held up for a second quarter, while faith in governments returned to levels seen earlier in the year after a very poor reading in the second quarter.

Furthermore, it showed that business confidence recovered marginally as 43 per cent of respondents reported a loss of confidence, down from the 45 per cent previously recorded, while 34 per cent reported increased confidence in the prospects of their own organisations, up from 28 per cent in the second quarter.

The macro-economic outlook also improved, with 61 per cent of respondents (up from 55 per cent previously) believing economic conditions are improving or about to do so.

The pessimists made up 36 per cent of the Africa sample, down from 42 per cent.
ACCA Director for Sub-Saharan Africa, Jamil Ampomah said:  “Despite these general improvements, business capacity building failed to pick up, against a backdrop of lingering uncertainty. It is clear that Africa’s businesses have suffered a very substantial drop in business confidence in the last year, and will remain cautious for some time.”

The two bodies, ACCA and IMA warn that only the continued strength of financials and selected emerging markets helps maintain the illusion of recovery.

Meanwhile, the third quarter GECS findings based on the views of 1,000 finance professionals around the world also showed that a third of global respondents (33 per cent up from 32 per cent in the last quarter) experienced a loss of confidence in the last quarter, while only 28 per cent reported confidence gains, down from 30 per cent in the previous quarter.

A majority of finance professionals (58 per cent) were still optimistic about the state of the economic recovery in their countries with 37 per cent pessimistic – a fall of one percentage point on the last survey.

Ampomah added: “It is clear that the buoyancy of the financial sector has masked the true picture in the real economy, where despite growth capital being at its most accessible since the global economic crisis, the lack of genuine business opportunities has meant that investment has been subdued around the world.

“The drop in demand for oil and other commodities has also been a test for many emerging economies, which rely on fuel and mineral exports for continued growth and financial stability.”

Culled from: http://www.thisdaylive.com