Business News of Thursday, 7 February 2013

Source: Daily Graphic

Business optimistic about 2013

In the midst of utility supply irregularities and high interest rate regime, the private sector is optimistic about performance of their business. Samuel Doe Ablordeppey reports

Business executives in Ghana are very optimistic that their companies will perform better in 2013, owing to expected improved market place; falling cost of raw materials; and an enhanced purchasing power.

The Business Barometer for the fourth quarter of last year, which gauged the perception of Chief Executive Officers (CEOs), indicated that about 67 per cent of the CEOs interviewed in the 2012 Fourth Quarter survey expected their businesses to perform better in the first quarter of this year, compared to that of the last quarter of 2012.

The Business Barometer Survey was conducted by the Association of Ghana Industries (AGI) to gauge the state of the business climate, while finding out the challenges plaguing the smooth running of industries in the country.

The Business Barometer Indicator (BBI) is an index that measures the level of confidence in the business environment and predicts short-term business trend. It is calculated out of “current” business mood and “expectations” for the future.

The 2012 quarter four BBI recorded a positive indicator of 40.4, which indicates a rise in business expectation over the 2012 third quarter, which recorded an indicator of 19.8.

The Executive Director of the AGI, Mr Seth Twum Akwaboah, told the GRAPHIC BUSINESS that “the result is an indication that the confidence level of the business community in the business environment has gone up compared to quarter three of 2012.”

While a small percentage of only 4.3 per cent of the CEOs interviewed held the contrary view that their businesses would perform poorer in the first quarter of 2013, compared to 2012 quarter four, a whopping 29 per cent of respondents said business performance in the first quarter of 2013 would remain unchanged, compared with that of 2012.

The pessimism was based on an anticipated increased cost of inputs; rising interest rates; and sustained inflation, while the unchanged views assigned “market conditions, cost of raw materials and depreciation of the cedi” as some of the factors that would account for that.

The survey also gleaned answers from the respondents as to what constituted their main challenges in the fourth quarter of last year.

In the order of priority, they listed access to credit, poor power supply and access to raw materials as their main challenges.

Other factors included cost of credit, high level of taxation and depreciation of the cedi. The rest were competition from imported goods, lower purchasing power, delayed payment and high utility prices.

However, for the manufacturing industry, poor power supply and cost of raw materials understandably represent their biggest challenges, especially since the survey was conducted at a time when the power supply challenges had just started to worsen and continued till now.

Mr Akwaboah said cost of credit was still a major problem, particularly towards the end of last year when most small and medium scale enterprises could not access credit easily and at cheaper costs.

“The power supply may have been knocked to the second position only because businesses may have come to accept the challenge and prepared for it. However, for the manufacturing sector, power supply still remains the foremost challenge, telling us of how serious that can affect manufacturing,” the AGI executive director said.

Asked whether the absence of a full government budget was hurting business planning, the AGI said that would not be a serious issue since businesses know that the phenomenon happened once in every four years.

“It is not the norm, so businesses will be okay with it. In addition, we are not expecting any sharp shift in the direction of the budget, except for major and new government economic policies and projects,” Mr Akwaboah said. He added that the association had not received any complaints regarding that from any of its members.

However, an industrialist and former President of the AGI, Mr Tony Oteng-Gyasi, wants policy makers to seriously watch the strengthening of the cedi, as that was a challenge, hurting the exporting community.

“The cedi should be allowed to slide in a controlled manner. The appreciation that we are seeing currently is only benefiting importers to the detriment of exporters; as a county, we need to decide whether we want to become import-dependent or export-led,” Mr Oteng-Gyasi averred.

He expressed fears that the outset of the so-called Dutch Disease may just be with the country and that efforts should be taken immediately to check it.GB