Business confidence dips
Brian Benza | Friday October 17, 2014 16:42
According to the results of a Deloitte CFO 2014 survey, majority of the 34 CFOs and financial directors that participated in the Botswana survey do not expect a major improvement in operational performance this year and will opt to improve existing operations than expand into new markets and businesses.
Anticipated increased competition as well a projected hike in interest rate is also among the other factors contributing to the drop in confidence.
“The bulk of Botswana’s CFOs predicted only slight improvements in company performance this year as well as 2015 and 2016. Moreover, while 24 percent predict significant improvement in 2014 this figure moderates to just 9 percent in 2015. Worryingly, three percent of Botswana’s CFOs expect significant deterioration this year and a further six percent predict the same outcome for 2015.
“The majority of Botswana’s CFOs favour deploying cash to improve existing operations. No less than 62 percent of respondents rank this among their top three cash flow priorities for this year, slightly higher than the 59 percent who said the same thing in 2013,” said Director in the Deloitte strategy practice, Roger George.
The lower business confidence comes on the backdrop of lower economic growth projections for 2014 with government forecasting Real GDP to grow at 5.2 percent from 5.9 percent last year.
After the economy grew at a faster than expected rate in 2013, the IMF project that Botswana’s real GDP growth is expected to moderate to 4.4 percent in 2014.
The lower economic growth forecast mirror global projections in which the IMF has trimmed world growth outlook to 3.3 percent.
According to the Deloitte survey, CFOs in Botswana are also very concerned about competition in their local market with 60 percent ranking this among their top three industry concerns. On the other hand, regulation was identified by 21 percent of respondents as their most pressing industry worry with a further 18 percent ranking it second and nine percent naming it as the third most important concern.
Reflecting Botswana dependence on the developed economies, 39 percent of the CFOs interviewed identified the fragile state of the global economy as a risk to their business.
A further 24 percent ranked margin deterioration due to input costs pressures as a significant risk, highlighting the tide of inflationary pressure that is adding to profitability concerns.
“This survey gives us a better understanding into the underlying mood of Botswana’s CFOs and helps us ascertain what the underlying drivers are that are shaping their behaviour and strategic choices,” said Max Marinelli, Deloitte Country Manager and Partner. “Deloitte conducts CFO surveys across the world each year and our Botswana report is a highly anticipated regional contributor to these efforts.”
The Deloitte’s 2014 Botswana CFO Survey was conducted against a background of prevailing economic pessimism across Southern Africa, largely driven by the general feeling of uncertainty in South Africa, the continent’s second biggest economy.
This year 34 CFOs and Financial Directors participated in the Botswana survey with financial services (32 percent), construction (15 percent) and mining (12 percent) accounting for the majority of respondents. The majority (62 percent) of Botswana’s CFO respondents represent companies with annual turnovers of less than $25 million with a further 21 percent hailing from entities with turnovers of between $25 million and $50 million.