Institute for Public Policy Research Confidence on the March General business confidence continues to improve
The IJG Quarterly Business Confidence Survey First Quarter of 2010
Introduction
The IJG Business Confidence Survey is a quarterly assessment of business expectations. This survey was conducted in April 2010 by the Institute for Public Policy Research (IPPR). A questionnaire was sent to 103 companies, drawn from Namibia’s largest employers across various sectors of the economy, and 46 responses were received. The survey contained questions that sought to gauge business sentiment in terms of performance, revenue expectations, workforce dynamics and investment expectations. Survey Highlights The previous quarter analysis indicated that the high consumption festive season that fell within the period under review proped up business sentiment as revenue collection and general business conditions improved during the fourth quarter of 2009. •
The fishing sector continues to suffer from the strengthening of the Namibia dollar against major currencies as it is heavily reliant on exports
•
The education and training sector experienced brisk business during the period under review. They had to turn away prospective students due to limitations in capacity.
•
The mining and construction sector appears to have recovered from the deep experienced during the past two year
•
A new section has been introduced in the sector analysis, which looks at the media industry.
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Business Conditions and Performance IJG Business Confidence Survey Respondents' analysis of past business conditions
Better 42%
Worse 13%
IJG Business Confidence Survey Respondents' forecast of business conditions Worse 4%
Stay the same 45%
Remain the same 47%
Better 49%
ompanies were asked to rate general business busi conditions overr the past three months (January ( to Companies March 2010) as compared ared to the previous three-month three period. The trend seems to be encouraging as, like l in the last quarter analysis, a significant number of respondents said business conditions improved. In the first quarter of 2010, 42% of the respondents saw business conditions as being better than in the previous quarter, a marginal increase by one percent (41% in the previous analysis). The third quarter of 2009 also saw 42% of the respondents giving the same response. Twenty out of the forty-five forty respondents (45%) did not record changes in business conditions from the fourth quarter of 2010. 2010 Forecasts of business conditions in the second quarter of 2010 largely depict a favourable favo picture as 49% of respondents expect business conditions to be better while and 47% said they t would remain the same, respectively. In our previous report, first quarter forecasts forecasts turned out to be better for 35% of the respondents.
Revenue outlook IJG Business Confidence Survey Analysis of past turnover perfomance
Grew 45%
Decreas ed 21% Remaine d the same 34%
IJG Business Confidence Survey Respondents' turnover forecast 60%
57%
50% 38%
40% 30% 20% 10%
5%
0% Decrease Remain the same
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Grow
In this regard, companies were asked how they had performed during the past three months (January to March 2010) in terms of turnover (income from sales of goods and/or services). In the fourth quarter analysis, 59% of the respondents recorded growth in revenue, while the same was applicable to 45% of the respondents marking a slowdown. The fourth quarter high was mainly due to the high consumption festive season. For 34% of the respondents, turnover levels were the same as in the fourth quarter (31% in the previous period’s report). In the last three months of 2009, 10% of respondents recorded a decrease in revenue collection. This figure increased to 21% during the quarter under review. In terms of revenue collection forecasts, 24 out of 46 companies expect better turnover perfomance during the second quarter of 2010 (18 respondents in the previous report). Workforce Dynamics IJG Business Confidence Survey Respondents' decisions on labour 64%
70% 60% 50%
36%
40% 30% 20% 10% 0%
0%
Less workers
Remain the same
More workers
In this regard, companies were asked if they would employ more, fewer, or the same number of employees in the next three months (April to June 2010) as compared to the first quarter of 2010. The percentage of respondents who will maintain the same number of employees increased marginally by 2% to 64% compared to the first quarter of 2009. The encouraging thing is that there are no plans to reduce the labour force, a positive sign on the back of the recently released high unemployment figures. Job creation forecast increased marginally with 36% of respondents, compared to 33% in the previous period anticipating to employ additional workers.
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Investment Outlook IJG Business Confidence Survey Respondents' decision on investment
56%
55%
54% 52% 50% 48% 45%
46% 44% 42% 40% No
Yes
Companies were asked if they were planning any major investments during the coming three months (April to June 2010). Capital expenditure is expected in the second quarter of 2010, albeit at a lower level than in the first quarter as 20 companies, compared to 23 in the last analysis, have investment plans on their tables. Thirty one respondents had investment plans in the last quarter of 2009.
SECTORAL ANALYSIS
Agriculture This time we did not receive any responses form the agricultural sector. We expect responses in the next quarter since the grape industry’s peak period starts in June.
Banking and finance Eight responses were received from this sector. For the majority of the respondents, revenue collection was on an upward trend mainly on the back of increased credit extension in the aftermath of the global economic crunch. Two respondents indicated that they will invest in upgrading their information technology systems, while one specified banking system localization as an area that will utilize much of their investment funds. Overall, general business conditions remain favourable, just like in the fourth quarter analysis.
Education The third quarter analysis recorded the first respondent from this sector. This time two institutions participated in the survey. Both respondents said business conditions are improving as there is overwhelming demand for the programs that they offer. They have both reached maximum capacity and had to turn away prospective students at the beginning of this year. Revenue collection is set to peak in the second quarter as students will be paying off the balance school fees owed to the
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institutions. The two institutions have investment plans, and one institution will add more rooms to its hotel school at a cost of more than N$10 million.
Fishing Four responses were received this quarter, an increase by one compared to the last two quarters. The responses from this sector were not encouraging as all respondents do not expect improvements in the general business conditions and have no investment plans. One respondent lamented the strengthening of the Namibian dollars against major currencies as this caused a drop in revenue as their business is mainly conducted in major currencies like the United Stated dollar and the Euro. These results are similar to what was gathered in the last quarter’s analysis.
Health Five responses were received from this sector. Business conditions were generally better during the period under review. Like in the last report, one respondent based in Swakopmund attributed the improvement in business conditions to the general population growth in that town due to increase in mining activity. This has prompted the respondent to introduce new services and this will lead to more jobs being created, as well as more capital expenditure.
Hospitality We received three respondents from this sector this time. We did not receive any respondents during the previous period. All indicators were positive, except the investment indicator.
Information and communication technology General business conditions were generally better for the two respondents. More employees will be brought on board and investment projects will be undertaken.
Manufacturing Four manufacturing concerns responded to the questionnaire. Unlike in the last analysis where indicators generally remained constant, optimism feature prominently this time with the current quarter expected to be better in terms of business conditions and business performance. More jobs will be created and more investment plans are in place, although no specific details were highlighted.
Media This is a new addition to this series. We only received one respondent, a commercial radio station. The respondent expects revenue collection to improve and business conditions to be better in the second quarter of 2010. The respondent will not employ more people or invest in any major projects in the second quarter of 2010.
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Mining and Construction Five responses were received from companies operating in this sector, exactly half the number of responses in the previous reporting period. General business conditions in both sub-sectors continue to improve as market conditions change for the best, just like in the last quarter analysis. A relatively new respondent that is still setting up operations is in the process of increasing its workforce in order to have the right number of employees when they start operations.
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About the IPPR and IJG The Institute for Public Policy Research (IPPR) is a not-for-profit organisation with a mission to deliver independent, analytical, critical yet constructive research on social, political and economic issues that affect development in Namibia. The IPPR has been established in the belief that development is best promoted through free and critical debate informed by quality research. IJG Securities (Pty) Ltd, which sponsors the this Retail Survey, is one of Namibia’s leading financial services boutiques, serving the institutional and corporate market and specialising in research, debt and equity placement, corporate finance, and equity and fixed-income dealing.
© IPPR 2010
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