Business confidence at record low

Government’s job appears cut out for it in assuring the business community of an economic turnaround as confidence in the business environment has sunk to an unprecedented low.

At 90.13 in the first quarter, business confidence was already considered low; but the second quarter results of the AGI’s business barometer report indicate that the situation has worsened sharply to an all-time low of 22.42.

The Business Barometer Indicator measures the level of confidence in the business environment; it simply expresses the state of the business climate numerically in one figure, with 100 as the base index.

The second quarter results show that businesses (93 percent) do not expect growth in the next six months; in fact, some of them are considering downsizing.

Businesses of all sizes and hues singled out the steep depreciation of the cedi (almost 30 percent since January) as their number-one challenge, followed by the defective power situation and multiplicity of taxes in that order.

The Bank of Ghana’s foreign exchange rules and delayed payments to contractors completed the list of the top-five challenges troubling businesses.

Chances of employers hiring more staff also worsened in the second quarter. In the first quarter, 78.5 percent of businesses said they did not expect an improvement in employment numbers. This number shot up to 93 percent in the second quarter.

“With the rising cost of doing business, businesses risk shutting down if the trend continues,” said a communiqué by the Economic Affairs Committee of the AGI, which met over the alarming results of the survey.

“The present economic conditions are not conducive enough to attract the local and foreign investments which could generate much-needed employment. AGI believes the restoration of macro-economic stability is central to Ghana’s economic recovery.”

The business lobby has thus endorsed the IMF bail-out government is seeking, calling it “the only option left”.

The communiqué, read by AGI president James Asare-Adjei, said: “AGI hopes the engagement with the IMF will be managed to ensure that the country obtains value for money in all economic transactions. Further increases in the tax burden on the formal private sector risks killing the hen that lays the golden egg”.

While urging the “active involvement” of industry in the IMF engagement, the AGI called on the Bank of Ghana to scrap the foreign exchange measures it announced in February since they “have not succeeded in stopping the currency depreciation”.

The association further called on government to come up with an “action plan with specific timelines” to make it possible for implementation of the Senchi Consensus.

By Basiru Adam | B&FT Online | Ghana