Risks to business outlook in 2016
Access to finance, exchange rate and prices of energy and natural resources remain the topmost risks facing their operations in the coming year.
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This came to light when the companies took part in the ‘World Business Outlook 2015’, a worldwide survey conducted by the German Chamber of Industry and Commerce (AHK) Network among its members and associated companies.
In all, the survey covered more than 2,000 respondents in 90 countries worldwide, including Ghana. A total of 35 companies in Ghana, who are members of AHK Ghana, took part in the survey, the first time the Ghanaian-based companies which are involved in bilateral trade, participated in the exercise.
More than 50 per cent of the respondents from Ghana chose the three factors as one of the major risks to their outlook; more than 40 per cent of respondents cited economic policy framework as another risk.
It is not surprising that almost half of the respondents cited economic policy framework, as some European and United States companies have expressed misgivings about the country’s Local Content and Local Participation in Petroleum Activities regulation.
They are skeptical about nationalisation of private sector ventures and, therefore, view the Local Content regulation with a pinch of salt. The US and the European Union have openly expressed their reservations about the law, arguing that it could stifle foreign direct investments.
They also have concerns over the revised investment laws of the country. While some of the investors, particularly European investors, have a challenge with the high threshold of US$200,000 needed for foreign investors’ participating in a joint venture operation in the country, others are worried over the post-investment legal regime which impinges negatively on their operations.
Previously, one needed to enter the country with only US$10,000 capital to start up a business.
This threshold allows investors to engage only one expatriate worker, and investors desirous of employing more expatriates need to shore up more capital to be allowed to use the service of expatriates rather than Ghanaians.
At the lower end of the risks ladder is the lack of skilled workers, cited by a little over 20 per cent of response; legal certainty and labour costs exceeded 10 per cent, with demand being named as a risk by less than 10 per cent of the Ghanaian participants.
Risks in other countries
Comparatively, however, economic policy framework and exchange rates were the only risk factors named by more than 50 per cent of the participants from Angola.
In Kenya, economic policy work, exchange rates, legal certainty and demand were named as risk factors by more than 50 per cent of participants, while in South Africa economic policy work and exchange rates were the only factors named by more than 50 per cent, with economic policy work being considered a risk factor by 80 per cent of the South African participants.
Company expectations
When assessing the business situation of their respective companies, 36.6 per cent of the African-based participants stated their situation had improved, while 50.7 per cent stated it remained constant and 12.7 per cent noted a worsening in their business situation.
This compares favourably with most world regions and the cumulative world figures. In fact, only companies from North America and Central Europe outside of EU (such as Switzerland and Norway) assessed their business situation more positive than the African-based companies.
When it comes to their expectations in the local business development for the next 12 months, the African-based company representatives actually have a more positive outlook than participants from any other region.
Worldwide 31.34 per cent of the participants expect the local development of their companies to improve, 52.12 per cent expect the local development of their companies to remain constant, with 16.53 per cent expecting the local development to worsen.
In Africa, participants’ expectations are 40.31 per cent will get better, 41.86 per cent expect it to remain constant with 17.83 per cent expecting a worsening in 12 months.
In Ghana, the companies are hopeful of better times. A total of 26 per cent said their situations would get better in the next 12 months, with 60 per cent expecting things to remain constant. This leaves only 14 per cent of respondents expecting a worsening outlook in the next 12 months.
Curiously, 71 per cent of the participating companies said the economic trend would get better, with 29 per cent saying it would remain constant. None expected a worse economic trend to Ghana’s economic outlook in the next 12 months.
Interestingly, 58.3 per cent of the African-based participants expected an increase of their company’s investment in the next 12 months. This is higher than in any other part of the world and compares favourably with the second ranked region which is North America with 50.3 per cent of participants expecting an increase in their company’s investment. The worldwide average is 45.9 per cent.
AHK Ghana comments
Commenting on the findings, the Delegate of AHK Ghana, Mr Patrick Martens, said he saw the outcome of the survey as a confirmation of the potential in Ghana and Africa.
“As an institution, we hope to support German and Ghanaian companies operating in Ghana or planning to enter the Ghanaian market with our market knowledge in order to unlock that potential,” he said.
Explaining further, Mr Martens told the GRAPHIC BUSINESS that businesses felt that the Ghanaian and African situation was not a worst-case scenario and were rather hopeful of better times, a development which all stakeholders should work to make it a reality, including implementation of the right business-friendly policies.
AHK Ghana is looking forward to an increased participation in the next World Business Outlook expected to take place at the end of the first quarter or beginning of the second quarter of 2016.
