The prospect of change amid the political uncertainty boosts business confidence

The seismic shift in power – or attempt to establish such a changeover – on the political platform with a new administration being sworn in, even as the incumbent steadfastly refused to cede what it claimed was its rightful position in parliament, has certainly had a ripple effect on multiple fronts.

While some stopped at describing the goings on as a constitutional crisis, others charged that what transpired was in fact a constitutional coup albeit sans the use of weapons or widespread bloodshed.

It may come as a surprise therefore, that amid the constitutional impasse and ugly political wrangling at the time, business confidence has been restored in no uncertain terms – although importantly, it should be noted that the latest LMD-Nielsen Business Confidence Index (BCI) survey was conducted during the first week of November, which was in the immediate aftermath of the president’s sudden appointment of a new prime minister on 26 October but before the dissolution of parliament on 9 November and what has transpired since then.

THE INDEX The BCI moved up from 85 in the previous month to 110 in November, representing the highest jump (25 basis points) since the now defunct coalition government was formed in August 2015 (in September of that year, the BCI skyrocketed by 29 points) – although that proved to be a flash in the pan with a reversal of 46 basis points a month later.

The question one might ponder on therefore, is whether there will be a repeat of this come December.

“Political instability remains one of the biggest national and business concerns; but businesses feel that there would be measures towards improving the ease of doing business by whichever regime assumes power next,” says Nielsen’s Managing Director Sharang Pant.

SENSITIVITIES Politics, economic concerns (including taxes and currency depreciation), and bribery and corruption are among the key sensitivities cited by businesspeople.

“With the new government [ahead of the dissolution of parliament] in place, we expect that taxation on many goods and services will be reduced or even removed, which will increase consumer spending – and with that, our business will benefit,” notes one corporate executive.

In contrast, another businessperson laments: “Business and the tourism industry as a whole have taken a hit as a result of the political situation. There are many cancellations for up until February 2019 and it will take some time for this situation to improve.”

PROJECTIONS In last month’s edition, we said that the business landscape was unlikely to show any sign of a reprieve against a backdrop of higher oil prices and the trade war between the world’s two largest economies.

Whilst these conditions may continue to hold true, one cannot discount the impact of changes on the ground inasmuch as they’ve seemingly led to a sense of optimism in business circles.

Given the state of the nation at the time of going to press, it is anyone’s guess as to where the barometer of business confidence will head – suffice it to say that there could well be more surprises ahead.

– LMD