David Malingha Doya
2 October 2007
Nairobi — Business leaders in Kenya, Uganda and Tanzania hope to earn more profits in the last half of 2007 than they did last year, according to a survey by Steadman Group, a regional market research company.
The Business Leaders' Confidence Index showed that businesses in Kenya are the most confident, with 74 per cent of those surveyed saying that business will be better in the run-up to the Christmas period, while Uganda and Tanzania scored 67 per cent and 63 per cent respectively.
The survey, done every six months, is based on what leading business executives in various sectors like services, manufacturing and agriculture think of prevailing economic conditions in the country. They are later asked to state economic expectations and how business will fare in their respective industries in the following months.
Such surveys are done on a monthly basis in more dynamic economies like the US. It is understood though, that organisations such as the World Economic Forum will soon use this index as a yardstick for business performance in sub-Saharan Africa.
George Waititu, Steadman Group managing director, said that business leaders in Uganda's financial sector at 71 per cent, and in telecommunications and ICT at 70 per cent, are the most optimistic. "Financial services, in particular, have seen a dramatic rise in confidence with telecoms and ICT not far behind," he said.
The increase in confidence was attributed to increasing deposits from a growing banking clientele, increasing loan-books of various financial institutions, a construction boom in the country needing credit from banks and a stronger capital market.
Indeed, 79 per cent of respondents from the three countries saw the stockmarket as a viable option of raising long-term capital for their businesses, especially business leaders in Kenya, followed by those in Uganda and Tanzania respectively.
Like other sectors in Uganda, the telecommunications and ICT sector expects to make money from the Commonwealth Heads of Government Meeting in Kampala this November.
However, only 62 per cent of business leaders in the manufacturing sector were confident of making more profits in the second half of 2007, although the basis for this opinion seems to have since changed two months after the survey was done in July.
Baker Magunda, managing director of Uganda Breweries and board member of the Uganda Manufacturers Association, said that, at the time the survey was done, the sector was just coming out of a power crisis that had badly affected business.
"At that time, we thought it could not get any worse really, so it was difficult for us to be confident of making money soon," he said. "However, the government came up with many reforms to overcome the power problem, and things have since changed."
But as the power crisis eases, manufacturers are now wary of floods, which have cut off about 20 per cent of the country in the North and Northeast, and whose impact on the deteriorating roads will affect earnings of distribution companies like breweries and manufacturers of beverages.
"Our trucks are stranded in flood areas because they cannot come back to Kampala," said Mr Magunda.
However, the flood situation is getting a mixed reaction because manufacturers of basic goods like soap, plastics and clothing expect orders from the government and humanitarian agencies over the next three months.
On the whole, however, manufacturers believe that after the mitigation of the power crisis, their views would have been different in the survey, given other factors like positive political developments in the Great Lakes region, which means a wider market for them.
Mr Magunda said, "Rwanda is now peaceful; Burundi just signed a peace deal; Southern Sudan is more stable, and there is no evidence that these countries will be manufacturing for themselves soon. So we expect them to depend on us for at least another 36 months."
However, what left business leaders in Uganda puzzled is why confidence among Kenyans remained high even as they go into an election in December, a factor that was blamed for low business morale in Uganda last year and is indeed typical of most African economies.
But Mr Waititu said, "Perhaps the business community in Kenya has learnt to carry on regardless of what is happening in politics."
Some 67 per cent of all business leaders surveyed in the three countries were confident that government policies were promoting business growth significantly. Most were optimistic that they would expand and take on more employees in the second half of this year.
However, business leaders particularly in Uganda showed no confidence in their government's commitment to protecting the environment, an element that was introduced in the survey when the Mabira forest reserve controversy made it evident that it could have a gross impact not only on a single sector but the whole economy.
Other problems that remain are corruption, smuggling and counterfeit products on the market.
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