Finding treasure in the National Treasury

The National Treasury assures us that South Africa is not in a worst case scenario, despite the downgrade by two rating agencies, South Africa is still considered in the investment grade by Moody and Standard & Poor’s. This recognition is enough to create a staircase for. The critical issue at present is to evade further downgrades. With great focus on properly implementing existing policies, there are still many possibilities for the country’s economy to grow. With growth spurred by higher demand in China and a growing economy in the United States, South Africa could yet walk out of its economic downfall.

South African Finance minister Malusi Gigaba will meet International counterparts at the IMF and the World Bank meeting in Washington DC on 21 April 2017  with the aim to reassure, reaffirm and instill confidence in the South African economic stability. The South African Treasury is confident that the economy is resilient and robust enough to bounce back to investment grade, it has policies already being implemented to ensure a lift in the economy and a curb in the decline of the rand. The treasury is assuring citizens of its plans and efforts to boost the nation’s financial situation.

“Radical means it must be quick‚ there must be change and something must happen immediately and transform the economy to serve all our people.” Cyril Ramaphosa

Read more on restoring SA economy here

Global uncertainty marks drop in business confidence

The South African economy has recorded its fair share in business confidence declines since the 2008 market global crash. Recently, in the 4th Quarter of 2016, the RMB/BER Business Confidence Index declined to 38 from 42 points. This would be equal to levels last seen in the 1970’s and 2010’s.

 

The latest Global Economic Conditions Survey from ACCA (the Association of Chartered Certified Accountants) and the IMA (the Institute of Management Accountants) point to a similar global business confidence drop in Q4. The findings of the survey highlight businesses and economic forecaster’s sentiment towards 2017 and a new age of uncertainty.

 

CONCERNS, FACTORS

Fall in Government investment; changes in political landscapes and economic isolation are all contributing factors to the decline. The survey of over 4,500 finance professionals and business leaders worldwide has found that while the economic outlook has improved slightly in the US and China over the last quarter, the Eurozone has hit its lowest confidence levels since 2012. In South Africa, business confidence levies are lower than last seen post-2008.

 

44% of respondents expressed concern over falling income due to low levels of government expenditure, with another 43% reporting worsening business confidence.

 

Across the Eurozone, the resignation of Italian Prime Minister Matteo Renzi in December 2016, combined with a series of upcoming national elections, has led to a downbeat mood while UK business confidence fell sharply ahead of Brexit negotiations.

 

 “Current political uncertainty is clearly having an impact on global business confidence. In the US the Trans-Pacific Partnership is unlikely to be ratified while likely restrictions on trade with key markets including China and Mexico are also major factors here. In Europe, uncertainty over the outcome of elections in the Netherlands, France and Germany – which could lead to major policy shifts for regional trade and the future direction of the Eurozone – all contribute to a gloomy outlook going into 2017.”findings Faye Chua, Head of Business Insights at ACCA

 

FUTURE UNCERTAINTY

Despite this and the slowdown in manufacturing worldwide, the global economy may be on course for growth in 2017, supported significantly by China’s growing response to its economic stimulus programme and the US maintaining a partial recovery.

 

In South Africa, there is an overall consensus that the Rands strength could beat 2015 levels. A stronger Rand equates to economic stabilisation, steady inflation, and stronger GDP figures. What South African economists are now looking towards is the level of uncertainty brought on by rapidly changing domestic and international economies, politics and trade figures. However, the State of the National Address  will give clearer guidance locally to the year ahead and market analysts can have more concrete views on how we emerge on international trade pacts.

 

To view the survey visit http://bit.ly/2jtIsxi

 

Fieldwork for the Q4 2016 GECS took place between 24th November and 13th December 2016 and attracted 4,551 responses from ACCA and IMA members around the world, including more than 350 CFOs.

 

References

http://bit.ly/1eJT3sihttp://bit.ly/1eJT3si

http://bit.ly/2n9Rxuv

http://bit.ly/2n9UISQhttp://bit.ly/2n9UISQ

http://bit.ly/2n9RMWz

 

Part 1 -Unlocking the key to accessing African markets – CXO Africa Convention 2014

Panellists discussing African Investment at the CXO African Conference 2014

Panellists discussing African Investment at the CXO African Convention 2014

As a #CFO, can you spearhead African investment, without high risk? Then, once you have minimised the risk how do you unlock success with substantial returns?

At the recently held ACCA CXO African Convention, top level industry representatives were given an opportunity to discuss the burning issue of risk vs value when investing in Africa.

Traditionally, South Africa has been the destination of choice for foreign investment. South Africa has had relative lower risk factors than many other African countries. However with the rising cost of doing business in South Africa coupled with the lower than desired financial returns, many CFO’s are re-looking the financial viability of moving into Africa without first investing in South Africa.

Countries such as Ethiopia, Kenya and Nigeria are seen as potential investment hubs and now more than ever, the risk vs return is becoming attractive to foreign investors. Foreign investors, many from Europe, Americas and Asia are looking for new frontiers, fresh markets and affordable labour. This perfect mix outweighs the risk generally associated with doing business in Africa. In the 90’s a well-known South African financial magazine published a cover titled “Africa, the hopeless continent”. This was followed with the same magazine publishing a cover story in 2011 titled “African rising”. So what has changed?

According to Nenad Pacek, President of Global Success Advisors, “Global companies have started to take note of the favourable economic growth figures coming out of Africa. Countries such as Nigeria, Kenya, Ethiopia and Zambia are all recording 5%-8% growth figures”. So the figures make sense, but how do we enter these markets with relatively low financial risk?

The focus should be on evaluating the market, risk assessment, economic and social research and importantly the cost of exporting. Many potential investors fail to look at the “smaller” costs of doing business in Africa such as domestic travel, telecoms and access to daily amenities.

“ It is essential for CFO’s to do ground level or onsite research on the cost implications of doing business in Africa, this will help companies lower risk and forecast achievable returns”, Karen Smal, Acting heading, ACCA South Africa.

Nenad Pacek further advises that local representation is essential and that African investment requires full time ground level support. Setting up local offices, supported by a local team will help investors ensure that their product is suitable for the market. Many past failures are attributed to global companies investing in territories that they have very little knowledge of. Specifically to Africa, territorial make-ups differ vastly, and what works in Uganda may not work in neighbouring Tanzania. The product offering may need to be changed or repackaged accordingly. So in brief investing in Africa with minimal risk and maximum returns is to understand the vast differences within each territory and the cost implications of doing business in the respective territory. Essentially Ground level research holds the key to greater returns.

Sub Saharan Africa contributes only 1.5% to global business, the potential for market growth in this region and in Africa as a whole is unprecedented. According to Jo Pohl, CFO Standard Chartered Africa, 2.7 trillion dollars’ worth of revenue sits untapped in Africa.