Post on 25-Feb-2016
description
African Business OutlookPart of the Global Business Outlook
A joint survey effort between
Duke University,The South African Institute of
Chartered Accountantsand
CFO magazine
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CFO Global and African Business Outlook – Overview
African Business Outlook Duke University / SAICA / CFO Magazine March 2014
Global Business OutlookDuke University has surveyed CFOs around the world every quarter since 1996, most of those years jointly with CFO magazine. The survey takes the pulse of the business community and has a strong record of predicting future economic activity. The results are relied upon by Central Bankers, Analysts, Investors, and are widely reported in the press.
SAICA and the African Business OutlookSAICA joined the survey in 2013, helping to found the African Business Outlook. South African results are highlighted in the analysis, as are results from Nigeria and the rest of Africa, enabling SAICA and other survey partners to share key insights about the African economy with members of the Institute and others focusing on Africa. The analysis in this report will assist companies to make important business decisions as they can benchmark themselves against their global peers. The long run goal is to develop a large and steady set of responding African firms.
Key Survey Facts Survey Respondents: 41
Of which, 28 from South Africa, 9 from Nigeria and 4 from the rest of Africa The number of respondents may skew some reported results
Sample includes CFOs from both public and private companies representing a broad range of industries Retail/Wholesale, Mining/Construction, Manufacturing, Transportation/Energy, Communications/Media,
Technology, and Banking/Finance/Insurance
Certain questions are constant each quarter, to capture trends in corporate optimism, expected hiring and capital investment plans, inflation, wages, and many other categories.
Other questions change each quarter to examine topical economic issues and newsworthy business or political events that may affect the landscape of corporate finance.
Sentiment Regarding Domestic Economy
3African Business Outlook Duke University / SAICA / CFO Magazine March 2014
Q1 '14
Q4 '13
Q3 '13
Q2 '13
0% 10% 20% 30% 40% 50% 60%
South Africa, Last Four Quarters
No ChangeLess OptimisticMore Optimistic
Rest of Africa
Nigeria
All Africa Avg
0% 20% 40% 60% 80% 100%
Country Average, Relative to last Qtr
When ranked on a 100 point scale, All Africa Average optimism about domestic economic prospects increased from 53 in 2013 to 54.7 in Q1 2014 (South Africa: 52.5, Nigeria: 57, ROA: 66.7)
South African CFOs are less optimistic, other African CFOs more optimistic, compared to last quarter
Trends in South African OptimismCFOs have become less optimistic this quarter, continuing a downward trend The average African CFO, across all of Africa, is
also less optimistic than in Q4 2013
Sentiment towards domestic economy South African CFOs are dramatically less
optimistic than at the end of 2013 Nigerian CFOs and the rest of Africa are
more optimistic than at the end of 2013
4African Business Outlook Duke University / SAICA / CFO Magazine March 2014
Even though African CFOs are less optimistic about the overall economy, they have grown more optimistic about their own companies, compared to the previous quarter
Own company optimism remains consistently high in South Africa
South African CFOs maintain their optimism for their own companies, though this trend was tempered somewhat in Q1 2014
Own Company Sentiment
When ranked on a 100 point scale, All Africa Average own company optimism dropped from 72.3 in 2013 to 66.2 in Q1 2014 (South Africa: 67, Nigeria: 57, ROA: 78)
Q1 '14
Q4 '13
Q3 '13
Q2 '13
0% 10% 20% 30% 40% 50% 60% 70%
South African Own Company Optimism, Last 4 Qtrs
No ChangeLess OptimisticMore Optimistic
Rest of Africa
Nigeria
All Africa Avg
0% 20% 40% 60% 80% 100%
Company Optimism By Region
Compared to Nigeria and other parts of Africa, CFOs in South Africa are less optimistic about their own company’s future prospects 100% the surveyed non-South African CFOs are more
optimistic this quarter, relative to their views at the end of 2013
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African CFO Optimism Relative to Rest of World
African Business Outlook Duke University / SAICA / CFO Magazine March 2014
African CFOs are less optimistic about the prospects for their domestic economies. Own company African optimism is volatile and in general on par with own company optimism around the world.
Q2 '13 Q3 '13 Q4 '13 Q1 '1452
54
56
58
60
62
64
66
Comparative Domestic Economy Optimism Across Regions (Out of 100)
USAEuropeAsiaLat AmAfrica
Q2 '13 Q3 '13 Q4 '13 Q1 '1460
62
64
66
68
70
72
74
Comparative Own Company Optimism Across Regions (Out of 100)
Although significant swings exist quarter on quarter, African CFOs are generally equally optimistic about their own companies prospects as their counterparts in other regions Relative to end of 2013, own company optimism
decreased in all regions except for Asia
Over the past year, African CFOs were less optimistic about their domestic economies relative to their counterparts in other regions
Economic optimism in the USA, Europe and Asia increased while optimism in Africa and Latin America decreased over the last four quarters
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Top 5 Macro and Internal Concerns for African CFOs
African Business Outlook Duke University / SAICA / CFO Magazine March 2014
Currency Risk, Political Risk, Working Capital Management, and Attracting Qualified Employees are concerns throughout Africa. Other concerns vary by region.
South Africa Nigeria Rest of Africa1) Consumer Demand 1) Electricity Supply 1) Policy Uncertainty2) Labor Instability 2) Consumer Demand 2) Labor Instability3) Currency Risk 3) Currency Risk 3) Currency Risk4) Price Pressure from Competitors 3) Policy Uncertainty 4) Electricity Supply5) Policy Uncertainty 5) Inflation 4) Input Costs
5) Foreign Competition 4) Financial Market Regulation
South Africa Nigeria Rest of Africa1) Ability to Maintain Margins 1) Working Capital Management 1) Working Capital Management2) Attracting & Retaining Qualified Employees 2) Attracting & Retaining Qualified Employees 2) Supply Chain Risk3) Maintaining Morale/ Productivity 3) Supply Chain Risk 3) Ability to Forecast Results4) Working Capital Management 4) Maintaining Morale/ Productivity 3) Balance Sheet Weakness5) Ability to Forecast Results 4) Ability to Forecast Results 5) Attracting & Retaining Qualified Employees
4) Ability to Maintain Margins 5) IT Governance
Top 5 Macro Concerns
Top 5 Internal Concerns
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Earnings and Cash Flow Utilization
African Business Outlook Duke University / SAICA / CFO Magazine March 2014
South African CFOs expect an increase in all categories over the next 12 months though Revenue and Earnings increases have slipped from last quarter
Reve
nue
Earn
ings
Divi
dend
s
Tech
nolo
gy
R&D
Capi
tal
Mar
ketin
g0
10
20
30
40
% Change Expected in Next 12 Months in South African Companies
Q4 2013Q1 2014
Reve
nue
Earn
ings
Divi
dend
s
Tech
nolo
gy
R&D
Capi
tal
Mar
ketin
g0
10
20
30
40
% Change Expected in Next 12 Months by Region
NigeriaRest of AfricaAll Africa Avg
South African CFOs anticipate large increases in R&D and Marketing spending while barely increasing spend on Technology
Expectations about Revenue, Earnings, and Capital Spending have softened since last quarter’s survey but are still projected to increase by nearly 10%
Expectations higher outside of South Africa Revenue and earnings expected to increase by 10
- 15% on average Nigerian companies expect dramatic increases in
Tech spending with minimal increases in R&D, Capital and Marketing spending
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Mergers and Acquisitions Compared to World Regions
African Business Outlook Duke University / SAICA / CFO Magazine March 2014
Fewer African companies anticipate making an acquisition, compared to other regions
United States
Europe Asia Latin America
South Africa
Nigeria0
5
10
15
20
25
30
35
Percent of Companies Planning to Acquire at Least Part of Another Company in the Next 12 Months
Plan to Acquire International Acquisition
African companies anticipate lower acquisition rates compared to other regions over the next 12 months
South Africa anticipates 23.1% of companies to acquire another company• Only 7.1% of African firms will make an
international acquisition Among Nigerian companies making an
acquisition (12.5% of surveyed Nigerian firms), all anticipate making an international acquisition
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Expected Borrowing Costs and Effects on Spending
African Business Outlook Duke University / SAICA / CFO Magazine March 2014
60% of surveyed South African companies borrow externally and anticipate borrowing costs to increase by 1.2% by the end of 2014. However, planned spending would not decrease substantially unless rates increase by more than 4%*
12%
6%
25%
31%
6%
12%
6%
Anticipated Change in Borrowing Costs Over Coming 12 Months
-300 bps-200 bps+100 bps+200 bps+300 bps+400 bps+600 bps
No companies surveyed anticipate a decrease of more than 300bps
No CFOs expect borrowing costs to remain flat or to change by -100bps, +500bps
On average, borrowing rates would have to increase by over 4% before CFOs would reduce hiring, capital spending or borrowing plans
Companies plan to maintain hiring levels unless rates increase by >5%
*Note: Only uses data from South African respondents. Data from other regions incomplete.
Reduce Hirin
g
Reduce Capita
l Spending
Reduce Borro
wing -
2
4
6
% Increase in Borrowing Costs Before South African Companies Will:
Does Uncertainty Affect Plans of African Businesses?
10African Business Outlook Duke University / SAICA / CFO Magazine March 2014
Uncertainty about the economy and government causes African businesses to reduce/delay capital spending more than it affects other aspects of planning. Graphs below report uncertainty about …
Reduce/D
elay Captial S
pending
Reduce/D
elay Hirin
g
Increase Cash Holding
No Real Effect
0204060
General Conditions
South Africa Nigeria/Rest of AfricaAll Africa Avg
Reduce/D
elay Captial S
pending
Reduce/D
elay Hirin
g
Increase Cash Holding
No Real Effect
03060
Government Economic Policy
South Africa Nigeria/Rest of AfricaAll Africa Avg
020406080
Domestic Political Situation
0204060
Regulatory Implementation
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Corporate Culture
African Business Outlook Duke University / SAICA / CFO Magazine March 2014
All regions list “Customer Orientation” and “Integrity” as the two most important aspects of their company’s culture and “Customer Orientation” as their top priority for improvement
South Africa Nigeria Rest of Africa1) Customer Orientation 1) Customer Orientation 1) Integrity2) Integrity 1) Integrity 2) Customer-Orientation3) Adaptability 3) Adaptability 3) Near-Term Results Orientation4) Strategic Results Orientation 4) Near-Term Results Orientation 4) Internal Transparency
Top 4 Most Important Attributes of Company’s Culture
South Africa Nigeria Rest of Africa1) Customer Orientation 1) Customer Orientation 1) Customer Orientation2) Adaptability 1) Integrity 2) Internal Transparency3) Strategic Results Orientation 1) Adaptability 2) Detial Orientation
Top 3 Corporate Culture Priorities for Improvement
All Africa Avg
Rest of Africa
Nigeria
South Africa
0 10 20 30 40 50 60 70 80 90
Importance of Having a Strong/Well-Defined Corporate Culture
Very Important Medium Importance Small Importance
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Do Real Estate Bubbles or American Monetary Tightening Affect Africa?
African Business Outlook Duke University / SAICA / CFO Magazine March 2014
Only 9% of South African CFOs believe there is currently a real estate bubble in their country. A slight minority anticipate that US Federal Reserves monetary tigthening will affect their firms
Anticipated Change in Borrowing Costs Over Coming 12 Months
4%
41%
52%
4%
Anticipated Effect of US Federal Re-serve’s Quantitative Easing Taper on Own
Company Performance
Very negativeSomewhat neg-ativeNoneSomewhat positive
The vast majority of South African CFOs say there is not a Real Estate Bubble in South Africa Though not shown in the graph, 90% of Chinese
CFOs and half of Latin American CFOs believe that there is a real estate bubble in their home countries.
No companies surveyed anticipate the QE Taper to have a “very positive” effect on their organization
A slight majority of South African companies do not anticipate any effect attributed to the Taper
Though not in graph, Asian and LatAm CFOs say US Tapering will hurt their home country economies
* Note: Only uses data from South African respondents.
9%
91%
Is There A Real Estate Bubble in South Africa?
YesNo