The African Business Outlook is looking quite bleak, with corruption and a lack of adequate infrastructure seeming to be the biggest problems in the business climate. This is according to the latest results of the Global Business Survey done by Duke University.
Duke University has surveyed CFOs around the world every quarter since 1996. The survey aims to pulse the business community and has a strong record of predicting future economic activity. Central bankers, analysts and investors often rely on the survey results.
The South African Institute of Chartered Accountants (SAICA) joined the survey in 2013, helping to establish the African Business Outlook, with an initial focus on the South African economy. In late 2015, Nigeria was also added to the survey sample.
“Looking at the survey results over the last four quarters, African CFOs have been and continue to be the least optimistic in the world – both about their companies’ prospects and countries’ economic outlooks,” said Lindie Engelbrecht, SAICA’s Executive Director: Members and Global Alliances.
“However, the trend of South African CFOs being more optimistic about their own companies than South Africa’s economy in general is continuing, increasing from 42.9% in the third quarter to 46.6% in the fourth quarter of 2016. Their optimism dropped to 39% in the first quarter of 2017, which is understandable, considering South Africa’s downgrade to junk status.”
When respondents were asked about what keeps them awake at night, South African CFOs rated the currency risk, economic uncertainty and government policies as their most pressing concerns in the last quarter of 2016. In the first quarter of this year, they’ve added the volatility of the political situation to their list of concerns.
Even though expectations regarding product price inflation have decreased, it continues to trend above the rest of the world. Africa still has the highest expectation of inflation in the world. The African outlook regarding growth in sales revenue seems equally bleak with revenue growth expectations decreasing from 9.8% in the third quarter to 5.8% in the fourth quarter of 2016, and hiking up to a mere 10% in the first quarter of 2017.
While African CFOs expect a substantial decline in capital spending, South Africa anticipates a growth of almost 20% in this area. The expectation is also that earnings and full-time employment growth will decrease in 2017.
“When asked which policies or problems needed to be addressed to improve business climate in their countries, 66% of the respondents said that corruption had to be reduced, 52.8% believe that infrastructure has to be improved and 49.1% feels political instability needs to be addressed.Furthermore, African CFOs also believe future investment opportunities will be limited due to current debt burdens,” Engelbrecht added.
“Regardless of these fears and concerns, more than one in four African CFOs still expect to be a CEO in five years – the highest percentage in the world. Sixty-eight percent also believe that their current job tasks adequately prepare them to be a CEO sometime in the future, proving once again that many remain optimistic in economically uncertain times,” Engelbrecht concluded.
The survey had 53 respondents of which 23 were from Nigeria, 24 from South Africa and 5 from other parts of Africa. Unless otherwise stated, the analysis represents responses from across Africa.
The survey sample includes CFOs from both public and private companies representing a broad range of industries including retail/ wholesale manufacturing; communications/ media; banking/finance; mining/construction; transportation/energy; and technology.
Certain questions are constant each quarter, to capture trends in corporate optimism, expected hiring and capital investment plans, inflation, wages and many other categories. Other questions change each quarter to examine topical economic issues and newsworthy business or political events that may affect the corporate finance landscape.