Business Page December 16th, 2001

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.

The Outlook

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 important.

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 Merchant Bank


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 into reality.