Business Outlook for 2002
Ram & McRae, Chartered Accountants on Friday December
14, published its Annual Business Outlook Survey for the Year
2002. Today's Business Page presents extracts from the Report and discusses
some of the implications arising from the findings. The Survey includes the
responses from forty-three companies of varying sizes, organisational
cultures and products/services offered.
Business Page believes that while the Report does not constitute a
statistical measure of business activity and performance, it represents the
views of our businesswomen and men expressed in a survey which guarantees
anonymity. The government and indeed the rest of the country would not be
wrong to regard the views of the respondents as an accurate reflection of
their assessment of the economy, their performance and their expectations
for the year ahead. This is not an issue for acrimonious debate but of sober
discussion and dialogue between the government and the private sector. It is
very unfortunate that after so many years there is no formal and regular
process in which the private sector and the government discuss the problems
confronting the country.
This year's Survey elicited forty-three responses or 47% from a total of
ninety-two questionnaires sent out. Responses came from companies covering
the whole spectrum of the economy including distribution/retail 23%,
manufacturing 22%, services 22%, agriculture 12%, financial services 10%,
construction and architecture 7% and mining 4%. Note that some companies are
involved in more than one sector.
Of the forty-three respondents, only two companies (4.6%) are
emphatically confident about the economy's outlook for 2002 while six
companies (13.9%) are fairly confident. Thirty-four companies were either
not confident (25.6%) or not very confident (53.4%) about the prospects for
the economy in 2002. This compares with last year's results when twenty-one
respondents were either very confident (6%) or fairly confident (36%) about
the economy's outlook.
When asked to assess their performance in 2001, 27 respondents (63%)
consider theirs to be in line with expectations. Only 2 companies (5%)
consider their performance better than they had projected while fourteen
companies (33%) suffered from a decline in their anticipated performance.
Of the fourteen companies reporting a decline in performance, eight have
an annual turnover of over $1,000Mn, two of between $600Mn and $700Mn, one
of between $700Mn and $1,000Mn, one of between $600Mn and $700Mn, one of
between $100Mn and $200Mn and one with less than $50Mn. These companies
operate in a range of industries including distribution/retail,
manufacturing, mining, agriculture, financial and services.
Companies were asked to rate the national and international events that
made them more or less optimistic about the economy. There was overwhelming
pessimism on most of the issues. Issues on which greater optimism than
pessimism was expressed were the PPP/C-PNC-R relationship and the
publication of the Investment Code, though the failure to give it legal
status was overwhelmingly unpopular. This year's respondents showed more
confidence in the country's political situation due perhaps to the Dialogue
between the leaders of the country's two major parties.
The majority of the respondents are less optimistic about the world
economic outlook, international terrorism/war, the level of business
failures and corruption. Other significant causes for pessimism are
crime/drugs, the value of the Guyana dollar, management of the economy,
smuggling and Government support for business and investment.
Respondents were asked to indicate their agreement with the Government's
action on three highly publicised issues. Seventy-six percent of the
respondents (76%) express disagreement with the compulsory acquisition of
the Toolsie Persaud Ltd. land for development into a market area for street
vendors while Government's support for businesses in distress found
respondents equally divided while eight companies (20%) had no views.
Only two respondents (5%) agree with the publication of the Investment
Code without legal force while an overwhelming twenty-seven respondents
(64%) disagree. Thirteen respondents (31%) had no views on this issue.
On a weighted average basis, respondents identified lowering direct
taxation (69.8%), reducing interest rates (65.1%), and controlling inflation
(53.5%) as the issues they most want Government to take action on. For three
consecutive years lowering of direct taxation is at the top of the
respondents' wish list. Clearly our businesses consider the rates of tax on
corporate income (35%/45%) too high. With the country's manufacturing sector
in decline, the call for Government support has increased significantly.
The areas which a significant number of respondents consider likely to
impact their businesses in 2002 include consumer spending/demand (33.8%),
political stability/risk (33.2%), exchange rate (32.2%), electricity supply
& rates (31.8%) and interest rates (31.2%). While political stability
remains a significant issue, its weighting has fallen from 43.8% in 2001 to
33.2% in 2002.
When asked what operating issues they consider most important to their
business, respondents identified electricity supply and improving
product/service quality. In the 2001 Survey, the preparation of financial
information was considered the most important operating issue but is ranked
only third this year. As then, Customs procedures and inventory management
are considered important while environmental issues are considered least
Cash flow management, access to capital and timely information are
identified as the three most critical financial issues respondents face. Of
less importance are foreign currency availability, debt servicing and the
build-up in receivables/ inventory.
50.2% of the Survey's respondents identify employee productivity as the
human resource issue most important for success. Other important issues are
retention of key personnel (49.8%) and recruiting of key personnel (42%).
Employee fraud, industrial relations and incentive schemes were the least
critical human resources issues. The top three issues all speak of the
importance of recruiting and retaining efficient and qualified personnel to
the success of a company.
Significantly, the lowest ranked issues are the large number of
businesses for which the commercial banks have appointed receivers, domestic
and international freight, environmental legislation and the opening of the
The Survey presents a picture that is not at all reassuring. The
Government has failed to carry out key commitments such as a meaningful
investment code and any kind of tax reform. It would be wrong to suggest
that there has been no investment in the country during the past year but if
these merely replace businesses that have failed, then we are hardly any
better off. The current rate of migration is now considered as high as any
time in the past while there has been no period when as many businesses and
industries have been forced to close.
The private sector too needs to do much more advocacy and representation
work to make the case for the business community. Its silence during this
year has been astounding and inexplicable. Unless it develops the capacity
and the courage to engage the Government in serious debate to galvanise the
economy, then the gloomy expectations reflected in the Survey will translate