A new report dubbed ‘Deloitte CFO Survey 2015’ conducted by Deloitte, a global professional firm, has revealed that majority of Chief Financial Officers (CFO’s) in Ghana are pessimistic about the cedi’s future performance.
The report also revealed that currency volatility is seen as the top risk factor for businesses in Ghana.
The report was arrived at following a survey on Chief Financial Officers conducted by Deloitte in Ghana and Nigeria.
Many of the CFO’s surveyed in Ghana said challenges such as a steep currency depreciation, worsening energy crisis, rising inflation and interest rates are likely to push interest rates up in 2016. According to the survey, the anticipated rate hike in the United States is placing pressure on currencies worldwide.
While the 2016 elections in Ghana may be the cause of some anxiety for CFOs, 50% of them expect interest rates to remain the same in 2016. In Nigeria, 66% of Nigerian CFOs predict an interest rate hike of 100 basis points or more in 2016, although 50% of respondents expect it to remain the same in 2017, because interest rate of 13% in 2014, was cut by 200 basis points in 2015 to 11% with a view to boosting growth in the face of high inflation.
Meanwhile, Southern Africa respondents are somewhat more divided in their predictions, with 42% expecting the rate to increase and 51% expecting it to remain unchanged for the rest of 2015.
While all regions expect their currencies to depreciate against the US Dollar over the next two years, Nigerian CFOs are more optimistic about their currency’s performance against the US Dollar than Ghanaian CFOs.
The CFOs in Nigeria expect the Naira to appreciate by 1.5% to the dollar in 2017. The Ghanaian CFO’s respondents were much more subdued in their predictions, expecting a depreciation of negative 9.35 in 2015, negative 7.3% in 2016 and negative 5.5% in 2017.
The report revealed that fears around currency instability can probably be attributed to the commodities-based nature of the West African economies and their relative exposure to the economic fluctuations of the larger economies such as USA, China and key European markets. Second on Nigeria’s list of risks is the threat of terrorism and its impact on the economy, while margin deterioration due to input cost pressures is the second most worrying risk for CFOs in Ghana.
In Southern Africa, 49% of respondents mention the fragile state of global economic recovery as their top concern. The cost of capital according to the report has increased significantly for all regions, probably in response to an increase in interest rates, banks being more conservative in their lending criteria and the growth in equity markets. Funding is viewed as expensive by a large 83% of West African CFOs and 60% of Southern Africa CFOs.
Even though capital is costly, 53% of Southern African CFOs say it is readily available but the picture changes for West Africa where 39% of respondents say it is available, but 44% say it is hard to get.
The report suggests that the challenges in West Africa, is probably due to difficult operating and regulatory environments in Ghana and Nigeria, especially the latter, which is transitioning from an oil-dependent to a more diversified economy.
Strategically, Ghanaian respondents are looking to sell non-core assets while Nigerian CFOs are more interested in growing customers, channels and products.
Director Monitor Deloitte Michael J. Vincent speaking to Citi Business News said CFO’s in Ghana should be able to influence monetary policy in Ghana which will create the conducive environment for business. “I think the CFO’s have a platform where they can express their concerns and the issues which are keeping them awake at night.
I think that their roles are evolving so what the report does is to create a platform that allows CFO’s to engage with the markets, engage with CEO’s and interested stakeholder groups.
One of the key things that we spoke about is the role of the CFO’s in influencing monetary policy in Ghana and utilize the various platforms in order to influence the monetary policies in the country.
So the platform is for having these debates and discussions to look at ways in which they can influence decision making in the country.” In this year’s survey, CFOs were asked to rate big data and analytics as an enabler. CFOs in all regions rated it in the upper 70 percentiles with 76.7% for West Africa and 78.6% for Southern Africa.