YPO Global Pulse: Economic confidence in Africa slips in final quarter of 2016

Business & Finance

Confidence among African business leaders declines marginally while global outlook improves

JOHANNESBURG, 7th February 2017 YPO, the premier chief executive leadership organisation in the world, reported today that confidence among business leaders in Africa fell slightly in the fourth quarter of 2016. The YPO Global Pulse Confidence Index for Africa, which tracks economic confidence levels among chief executives on a quarterly basis, slipped 0.8 point to end 2016 at 54.7.

This was a reversal in the optimism that marked the first three quarters of 2016, during which African business leaders had reported increased levels of confidence.

Africa was the only region to report a drop in confidence in the latest survey and is currently the second-least confident region in the world, trailing the YPO Global Pulse composite score of 62.2 by 7.5 points.

The dip in confidence across the region was largely driven by more cautious sentiment among chief executives in Kenya, Nigeria and Zimbabwe. Confidence among business leaders in Kenya plummeted 8.0 points to 52.2; Zimbabwe plunged 4.5 points to a score of 42.7; and Nigeria fell 2.3 points to 41.9.

Following three consecutive quarters of gains in economic confidence in 2016, South Africa, which has the highest weighting within the region, held steady at 60.2.

“The outlook of business leaders in Africa is mixed across the region, which is understandable given the current fluctuations in economic performance in the main economies. With so much uncertainty surrounding the stability of global markets, it’s unlikely that sentiment will shift a great deal in the first half of this year,” said Gareth Ackerman, Chairman of Pick ‘n Pay and a YPO member from Cape Town. “Chief executives will be ultra-cautious over the coming months and will avoid taking on unnecessary risk, while keeping a very close eye on key economic indicators.”

Globally, the YPO Global Pulse Index for the fourth quarter of 2016 climbed by 3.0 points to 62.2, its highest level in two years. The United States reported the highest levels of confidence in the world, increasing by 4.2 points to 64.6, its highest level since January 2015. Confidence in the European Union remained steady at 60.9. Asia gained 1.2 points to land at 61.2. Elsewhere, confidence in Latin America increased by 2.4 points to 58.3, while confidence in the Middle East and North Africa jumped 5.6 points to 59.5. Non-EU Europe reported the lowest confidence, increasing 2.5 points to 54.3.

Key findings in Africa

Mixed feelings about general economic climate in 2017

When asked to comment on the outlook for economic and business conditions for the next six months, African business leaders were split. More than a third (37%) of chief executives predicted conditions would improve, compared to 35% who expected conditions to deteriorate. The remainder felt the economic environment would remain relatively unchanged.

Chief executives remain optimistic about prospects for their own organisations

While business leaders in Africa reported concerns over the general economic climate in the region, the majority remained positive about the outlook for their own organisations, although figures were down from quarter three. For the region, the three key indicators in the YPO Global Pulse Index, sales, hiring, and fixed investment, all fell in the final quarter of 2016. The YPO Sales Confidence Index dropped 2.9 points to 61.0; the YPO Employment Confidence Index edged down 0.4 point to 53.7; and the YPO Fixed Investment Index slipped 1.3 points to 57.6.

More than half (54%) forecasted an increase in sales in the next year, while only 15% expected sales to decline. It should be noted that in the previous survey as many as 65% expected to increase revenues in the following 12 months.

Almost a third of chief executives (30%) expected to increase their headcount over the next 12 months, compared with only 12% who anticipated that their workforce would be reduced. Again, this was down from the previous survey, when 33% predicted increased hiring.

More than a third of the participants (39%) predicted an increase in fixed investment in 2017 (down from 47% in the third quarter), whereas only 13% expected to cut investment levels.

YPO Global Pulse Confidence Index
The quarterly electronic survey, conducted in the first two weeks of January 2017, gathered answers from 1,514 YPO chief executive officers across the globe, including 101 in Africa. Visit www.ypo.org/globalpulse for more information about the survey methodology and to view the results from around the world.

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Linda Fisk
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