Businesses express low level of confidence in economy
Ghana experienced its lowest level of business confidence in the second quarter of 2014, the President of the Association of Ghana Industries (AGI), Mr James Asare-Adjei, has stated.
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He said although a Business Confidence Index (BCI) from a survey conducted by the AGI showed that the confidence level went up from 22.4 from a base line of 100 to 42 in the third quarter of the same year and 98 in the fourth quarter, it declined again to 85 in the first quarter of 2015.
“If you look at the average in five or four years, during every 2nd quarter it had always averaged 102.4 except quarter two of 2014,” he said.
Speaking at a Graphic Business/Fidelity Bank Breakfast Meeting in Accra yesterday, on the theme, “The Economy and Prospects for Business Confidence”, Mr Asare-Adjei said not less than 450 chief executive officers of companies from across the country participated in the exercise to measure the business confidence, which gave the BCI a true reflection of the level of confidence of businesses in the Ghanaian economy.
Business confidence refers to the level of optimism or pessimism that investors or the business community feel about the prospects of doing business in Ghana and is based on the predictability of the business environment as well as the security of investments.
Business confidence
The AGI president said “the sharp dip in quarter two of 2014 and recovery in quarter three of 2014 reflect the sensitivity of the index to key factors that impact on doing business,” adding that the recovery in quarter three was as a result of the withdrawal of Bank of Ghana’s (BoG) rules.
Mr Asare-Adjei listed other indices of business confidence as the ease of doing business index, which is carried out by the World Bank each year and the global competitiveness index survey, conducted by the World Economic Forum.
He stated that the AGI’s quarterly Business Barometer Survey was conducted to gauge the mood of the private sector as far as business confidence was concerned and also measured the performance of the economy at particular periods.
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“A 100 value reflects a normal business climate which means once the business confidence crosses that baseline then the confidence in the economy by way of business operations is ok. If it is below hundred then we say it is worse than a normal situation,” he explained.
Challenges, recommendations
Mr Asare-Adjei listed the challenges of Ghanaian businesses as the energy crisis, depreciation of the cedi, lack of access to credit as a result of the government crowding out the private sector in the domestic borrowing market, saying that in a year Ghana had lost about 36.1 per cent of the value of the cedi.
Others, he said, were the cost of credit, unfair competition in terms of imports and an unfavourable tax regime for local industries.
The AGI president suggested that to bolster business confidence, there was the need for policy credibility and consistency, a stable macro-economic environment, availability of power, fiscal discipline and a second look at the fuel deregulation policy among other interventions.
“We need to see the capacity of local industries built. The Bank of Ghana must find a way to regulate interest rates and the government should encourage local industries to attract public partnerships,” he added.
Writer’s email: edmund.asante@graphic.com.gh