Business confidence on the rise
Business confidence among private sector enterprises has continued to improve, posting a rise of 4.6 points to 106.5 points for the first quarter ending March, the Mauritius Chamber of Commerce and Industry (MCCI) reported yesterday.
The MCCI Business Confidence Indicator was launched in March 2010 with 100.0 points as the starting index, then it went down to 96.7 points during the second quarter ended June, and a further dip to 93.3 points in the third quarter ended September.
But it recrossed the 100.0 psychological mark to 101.9 points in the quarter ended December last year0. “The new indicator confirms the return of optimism observed by the entrepreneurs since the end of 2010,” said Mr Mahmood Cheeroo, Secretary-General of the MCCI.
During the presentation of the findings of a study between March 1 and 21 on a sample of 20 % (or 81 companies) of MCCI members, Dr Renganaden Padayachy, macroeconomist at the chamber, explained the factors that have positively influenced the results.
“An in-depth analysis of our last study demonstrates that 19.1% of the interviewees have witnessed an improvement in their own businesses during the last three months and 16.9% said that they had noted deterioration in their business activities.
The remaining 64% of the panel have noticed stability,” he said. According to MCCI, there are four factors behind the improvement of the business climate.
• Renewed dynamism since the last quarter of 2010, particularly in the larger enterprises.
• A more competitive rupee and a favourable evolution of Euro/Dollar cross rates which favour and make more attractive Mauritian products.
• External factors, such as the increase in costs of production in China and political instability in Middle East have driven buyers towards Mauritius again.
• The perception that the business conditions will be better in 2011 compared to 2010. The MCCI also said that during the previous study in December 2010, there was a greater number of enterprises which had reported an improvement of their businesses.
“In fact, 29.6% of the interviewees had noticed progress in their situation,” said the economist. About the evolution of business during the next three months, entrepreneurs are optimistic.
But this feeling could be revised during the coming weeks depending on the adverse impact that a rise of 50 basis points of the Key Repo Rate to 5.25% per annum might have on the business community.
As the study was made before the announcement of the decision by the Bank of Mauritius, MCCI reported that enterprises at that period were apprehensive about a rise in interest rate.
“More than 90% of the enterprises of the panel said they will be affected by an increase in the interest rate, because they use short-term loans for their operations,” Dr Padayachy said.
He added that a rise in the interest rate would increase substantially the cost of operations. Add to this, some entrepreneurs think they will be compelled to increase their selling prices to compensate for the rise in the costs,” he said.
“Wihtout any doubt, this decision will have negative repercussion on the moral of the enterprises. It will not be the only factor that will impact adversely on them, but it will be among other factors.
Since the announcement of this decision, the entrepreneurs have some apprehensions,” said Mr Mahmood Cheeroo. He also said that the regain in confidence that had started during the last quarter of 2010 has been fuelled by the significant drop in Key Repo Rate by 100 basis points to 4.75% per annum in September last year.
“This major cut in interest rate was very positive for enterprises and has allowed the regain of optimism and confidence in the business community.”
Mr Cheeroo said that MCCI understands government’s worries about rises in the prices of commodities, adding that the authorities had to choose between growth and inflation.
“Finally the weight of inflation has influenced the scale,” he said. “But for us the scale always leans on growth. It’s a matter of appreciation,” he said.
By Clifford Vellien
