The latest Global Economic Conditions Survey (GECS) from the Association of Chartered Certified Accountants (ACCA) and the Institute of Management Accountants (IMA) released recently showed that global business confidence is at its highest in 12 months.
However, it stated 45 per cent of companies in Africa reported that confidence fell in the third quarter, compared with global averages of 38 per cent respectively
The Head of ACCA Nigeria, Toyin Ademola, while commenting on the report said two factors accounted for the current weakness. The first was the slump in commodity prices, which has hit export incomes, government revenues and investment.
“The second is economic mismanagement in the region’s two biggest economies, Nigeria and South Africa, which has caused growth to slow sharply in both countries. Corruption and political instability have dragged down economic confidence, damaging investment in both countries. In general, two very significant issues to manage in Africa are exchange-rate volatility and rising costs.”
The report found more respondents in Africa (56%) reported that currency volatility caused them problems than those in any other region. A related concern is increasing costs (also a problem for 56% of companies), as currency falls push up the cost of imports.
The report found an uplift in sentiment in other parts of the globe. Business confidence in the U.S. improved for the third quarter in a row and currently at its highest level since last year.
The recent improvement in confidence coupled with strong employment growth and high core price pressures were all reasons to think that the Fed will resume its tightening cycle sooner rather than later.
The report noted that the investment opportunities index fell to its lowest level since the final quarter of 2012, possibly indicating that uncertainty over the outcome of November’s presidential election is causing companies to put big plans on hold.
Meanwhile, fears that headwinds from the U.K. vote to leave the E.U. in June could spread to the global economy have not been realised, with confidence among U.K. businesses holding up relative to the previous quarter – although it is still low, with respondents reporting a decrease in confidence outnumbering those reporting an increase. With protectionist sentiments on the rise across many nations, the November presidential election could have a significant impact on whether this improving confidence translates into genuine increases in employment and investment.