Cost of credit is a major challenge in industry – AGI
Cost of credit has been identified as the major factor hindering the growth of businesses in Ghana, according to an Association of Ghana Industries (AGI) survey.
This is the fifth of six surveys that industrialists have ranked cost of credit as the number one challenge in their quarterly assessment of the business climate in the country.
“The persistence of high cost of credit in the country is a major concern to businesses operating in the country, considering the fact that key determinants of cost of credit such as inflation, Bank of Ghana’s policy rate and Treasury Bill rate have declined significantly over the last nine months”, Nana Owusu-Afari, President of AGI, said.
Overall, there is high optimism among CEOs that the business climate would improve during the fourth quarter on hopes that the December festive season would lead to a boom in market activities and the recent downward review of the electricity tariffs.
However, the actual business climate remained unchanged in the third quarter, while 26 per cent of the industrialists believed that the business climate improved, 24 per cent thought it declined in the period under review.
One out of 10 CEOs, however perceived a gloomy picture of the third quarter. They envisaged that the interest rates charged by banks and the recent utility prices would worsen the climate in the fourth quarter.
High cost of credit, cost of raw materials and utility prices stood prominent as the top three challenges for businesses in Ghana.
The perception index that the CEOs were facing increased competition from foreign companies moved up a step to the fourth position in the third quarter. Delay in payment for contracts executed ranked 10th, yet important among the challenges.
On sectoral challenges, the manufacturing sector saw high utility prices, cost of raw materials, cost of credit as the three top challenges stifling growth of the sector while those in the agriculture sector identified access to credit, cost of credit and high cost of raw materials as key problems.
Low purchasing power, cost of credit and high cost of raw materials are the key challenges identified by the Services sector while delays in payment, low purchasing power, access to credit remained the bane of the construction sector.
The AGI BBI (Business Barometer Index) measures the level of confidence in the business environment and predicts short-term business trend. It simply expresses the state of the business climate ranging between +100 and -100. It is calculated out of “current” business mood and “expectations” for the future.
The third quarter recorded a positive indicator of 14.9 which indicates an improved business climate over the second quarter.
Contrary to the second quarter which registered an exceptional -0.21, the third quarter presented a more confident view of the business climate in the opinion of CEOs.
Source: GNA