Mauritius business confidence has dipped to 85.3 points for the first quarter of 2014, representing a 2.7 point decline compared to the previous quarter survey.
According to the Mauritius Chamber of Commerce and Industry (MCCI), the negative result in the first quarter of this year and the continuous weakness of the indicator demonstrates that the Mauritian economy is not yet out of trouble. The situation is especially worrisome as last year’s result hinted at a possible revival of the economy.
Held between February 21 and March 14, 2014, the survey shows that the confidence index of business managers has dived by 3.1%.
Dr Renganaden Padayachy, a manager at the Economic Analysis and Industrial Division at the MCCI, presented the Business Confidence Indicator yesterday during a press conference, which is based on a survey led by MCCI with business managers of various branches of industry.
Incidentally, the index has been struggling below the long-term average of 100 basis points for the two years.
The MCCI has established 14 factors to determine a company’s confidence level and among these 14 factors, ten showed a negative movement.
As regards the cost of doing business, the Chamber observes that more than two thirds of the consulted company directors declared that the unpredictable increase of indirect costs was strongly affecting the conduct of business. They evoke, among others, the failure to respect rules and standards, difficultly in accessing land, corruption, problems related to infrastructure or utilities covering energy, water and transportation.
For entrepreneurs, the rise in Trade fees and Advertisement fees, between 100% and 500%, was hard to absorb in these difficult times.
Another factor affecting business performance and prospects is poor internal demand. Dr Padayachy stated that since 2009 there is a deep deceleration of the consumption’s growth rate in Mauritius. The average rate, which was 6.5% from 2004 to 2008, fell to 2.5% over the post-crisis period of 2009-2013.
Concerning employment, entrepreneur declared intent to limit their investment expenditure due to poor economic prospects and prohibitive interest rates. Therefore, MCCI noted that if this trend continues into the next quarters, the unemployment rate could be expected to rise in 2014.
The survey on cost of capital demonstrated that the interest rate and the financial charges are a matter of concern for most entrepreneurs. The Chamber estimated that a reduction in interest rates would boost private investment.
Dr Padayachy further stated that delays in payment, competition in the market, lack of skilled workforce, incidence of corporate tax rates, and logistics and connectivity problems are other factors contributing to the negative impact on business confidence.
In spite of these unfavorable factors, economic operators consider that business opportunities in the region and in Africa pose interesting avenues as there was a noticeable improvement in the global economic environment.
The manufacturing sector recorded the strongest reduction of 4.4% in confidence levels due to below-average sales. Unlike in the last quarter 2013, where it registered an increase of 2%, the manufacturing sector has seen a decline in confidence because of a regression in turnover. The service sector index also fell by 2.6%.
The MCCI cautioned that officials should not await the budget to put a strategy in place for promoting enterprise growth, because then the growth rate for the entire economy would be affected. According to Padayachy, if no improvement occurs in the second quarter, the growth rate for 2014 might be similar to 2013.
Image (Afkinsider): In spite of unfavorable factors, economic operators consider that business opportunities in the region and in Africa pose interesting avenues as there was a noticeable improvement in the global economic environment.
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