African Business Reflects a Crisis Mentality-Survey

By Staff Writer

A Global Economic Conditions Survey by the Association of Chartered Certified Accountants (Acca) and the Institute of Management Accountants (IMA) indicates that business confidence in Africa seem to reflect a crisis mentality.

The second quarter of 2014 was a particularly difficult time for many African economies, with a large regular economic survey of finance professionals around the world recording the worst business confidence levels in five years.

The survey indicates that business confidence has steadily become decoupled from business opportunities since the second quarter of 2013 and is increasingly tied to government spending.

Over the last two quarters business confidence has become unresponsive to the supply of growth capital, the survey shows.

Business confidence has also become more sensitive to fears of unsustainable government finances as well as the strength of cash flow and demand.

"These are all signs of businesses worried about survival, and of a looming crisis,” said Emmanuel Schizas acting Head, SME Policy and Senior Economic Analyst at ACCA.

The survey shows that 45% of respondents in Africa reported a loss of confidence, up from 36% in early 2014.

Only 28% (down from 33%) reported confidence gains. Confidence was down throughout the real economy, among large financials and in the public sector.

“This level of pessimism wasn’t down to a poor macro-economic outlook among respondents in Africa. This became only marginally more negative since early 2014, with 42% of respondents (up from 41%) believing that conditions were deteriorating or stagnating," said Karen Smal of Acca South Africa.

"The majority remains optimistic with 55% (down from 57%) believing that conditions are improving or are about to do so."

Access to growth capital became more difficult, cash flow and demand conditions deteriorated, and input prices and exchange rate volatility remained elevated.

However, business opportunities rose marginally and opportunities for inorganic growth through business acquisitions or asset purchases remained stable.

As a result, business capacity building rose in the second quarter of 2014, according to Schizas.

Conversely, Africa and the Middle East fared worst globally, with all three areas either falling or stable.

But Africa is optimistic of turned tables as seen with the increase in  investments by economic power houses such as China and USA.