Business Confidence Plummets

By Esther Awuah

Nana Owusu Afari, AGI President

The confidence of the business community in the Ghana’s economy is tipped to go down in the final quarter of this year, the Association of Ghana Industries (AGI)’s Business Barometer Indicator (BBI) for the 3rd Quarter 2012 has stated.

The third quarter of 2012 recorded a confidence level of 19.8 which indicates a drop in business expectation over 26.2 recorded in the second quarter of 2012.

This implies that the fourth and final quarters of 2012 are expected to be affected by the development.

The report stated that irregular power supply was the topmost constraint to the growth of businesses in Ghana.

This development, according to the report “could be attributed to the load shedding exercise embarked upon by the Electricity Company of Ghana over the last four months.”

It noted that depreciation of the cedi and high level of taxation were ranked second and third respectively as obstacles restraining expansion of businesses in the country in the third quarter of 2012.

Low access to credit and cost of credit placed fourth and fifth positions respectively. At the tail end of the table are inflation, low purchasing power and competition from imported goods were ranked eighth, ninth and tenth respectively.

The report additionally notes: “this is the first time since the inception of the AGI Business barometer Survey that competition from imported goods is being ranked tenth. It is normally ranked at mid or upper end of the table. This shows how realistic the AGI Business Barometer is, as it always identifies the most pressing challenges facing the business community.”

The AGI BBI measures the level of confidence in the business environment and predicts short-term business trends. It expresses the state of the business climate in one number, ranging between +100 and –100. It is calculated out of “current” business mood and “expectations” for the future.

Decreasing business confidence often implies slowing economic growth because business owners are likely to decrease their investment.

It emphasizes: “Whilst about 57 percent of the Chief Executive Officers (CEOs) interviewed in the second quarter of 2012 said they expect the performance of the business environment to improve in quarter three, only about 52 percent of the respondents interviewed in third quarter of 2012 feel same about quarter four.”

It further added that “the reasons assigned by the optimists are an improved market, increase in output of labour force and availability of raw materials.”

However, those who expect their businesses to perform poorly in quarter four 2012 compared to quarter three 2012 based their assertion on expected: depreciation of the cedi, increase in inflation and increase in the level of tax rate.