Transcript Slide 1

African Business Outlook
Part of the Global Business Outlook
A joint survey effort between
Duke University,
The South African Institute of
Chartered Accountants
and
CFO magazine
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CFO Global and African Business Outlook – Overview
Global Business Outlook
Duke University has surveyed CFOs around the world every quarter since 1996, most of those years jointly with CFO
magazine. The survey takes the pulse of the business community and has a strong record of predicting future economic
activity. The results are relied upon by Central Bankers, Analysts, Investors, and are widely reported in the press.
SAICA and the African Business Outlook
SAICA joined the survey in 2013, helping to found the African Business Outlook. South African results are highlighted in the
analysis, as are results from Nigeria and the rest of Africa, enabling SAICA and other survey partners to share key insights
about the African economy with members of the Institute and others focusing on Africa. The analysis in this report will assist
companies to make important business decisions as they can benchmark themselves against their global peers. The long run
goal is to develop a large and steady set of responding African firms.
Key Survey Facts

Survey Respondents: 41
 Of which, 28 from South Africa, 9 from Nigeria and 4 from the rest of Africa
 The number of respondents may skew some reported results

Sample includes CFOs from both public and private companies representing a broad range of industries
 Retail/Wholesale, Mining/Construction, Manufacturing, Transportation/Energy, Communications/Media,
Technology, and Banking/Finance/Insurance

Certain questions are constant each quarter, to capture trends in corporate optimism, expected hiring and capital
investment plans, inflation, wages, and many other categories.

Other questions change each quarter to examine topical economic issues and newsworthy business or political
events that may affect the landscape of corporate finance.
African Business Outlook
Duke University / SAICA / CFO Magazine
March 2014
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Sentiment Regarding Domestic Economy
South African CFOs are less optimistic, other African CFOs more optimistic, compared to last quarter
Country Average, Relative to last Qtr
South Africa, Last Four Quarters
Q2 '13
All Africa Avg
Q3 '13
No Change
Q4 '13
Less Optimistic
More Optimistic
Q1 '14
Nigeria
Rest of Africa
0% 10% 20% 30% 40% 50% 60%
Trends in South African Optimism
CFOs have become less optimistic this quarter,
continuing a downward trend
 The average African CFO, across all of Africa, is
also less optimistic than in Q4 2013
0%
20%
40%
60%
80% 100%
Sentiment towards domestic economy
 South African CFOs are dramatically less
optimistic than at the end of 2013
 Nigerian CFOs and the rest of Africa are
more optimistic than at the end of 2013
When ranked on a 100 point scale, All Africa Average optimism about domestic economic prospects increased
from 53 in 2013 to 54.7 in Q1 2014 (South Africa: 52.5, Nigeria: 57, ROA: 66.7)
African Business Outlook
Duke University / SAICA / CFO Magazine
March 2014
3
Own Company Sentiment
Even though African CFOs are less optimistic about the overall economy, they have grown more
optimistic about their own companies, compared to the previous quarter
Company Optimism By Region
South African Own Company Optimism, Last 4 Qtrs
Q2 '13
All Africa Avg
Q3 '13
No Change
Q4 '13
Less Optimistic
More Optimistic
Q1 '14
0% 10% 20% 30% 40% 50% 60% 70%
Own company optimism remains consistently
high in South Africa
 South African CFOs maintain their optimism for
their own companies, though this trend was
tempered somewhat in Q1 2014
Nigeria
Rest of Africa
0%
20%
40%
60%
80%
100%
Compared to Nigeria and other parts of Africa, CFOs
in South Africa are less optimistic about their own
company’s future prospects
 100% the surveyed non-South African CFOs are more
optimistic this quarter, relative to their views at the
end of 2013
When ranked on a 100 point scale, All Africa Average own company optimism dropped from 72.3 in 2013 to
66.2 in Q1 2014 (South Africa: 67, Nigeria: 57, ROA: 78)
African Business Outlook
Duke University / SAICA / CFO Magazine
March 2014
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African CFO Optimism Relative to Rest of World
African CFOs are less optimistic about the prospects for their domestic economies. Own company
African optimism is volatile and in general on par with own company optimism around the world.
Comparative Domestic Economy Optimism
Across Regions (Out of 100)
66
64
62
60
58
56
54
52
Comparative Own Company Optimism
Across Regions (Out of 100)
USA
Europe
Asia
Lat Am
Africa
Q2 '13
Q3 '13
Q4 '13
Q1 '14
Over the past year, African CFOs were less
optimistic about their domestic economies
relative to their counterparts in other regions
 Economic optimism in the USA, Europe and Asia
increased while optimism in Africa and Latin
America decreased over the last four quarters
African Business Outlook
74
72
70
68
66
64
62
60
Q2 '13
Q3 '13
Q4 '13
Q1 '14
Although significant swings exist quarter on quarter,
African CFOs are generally equally optimistic about
their own companies prospects as their
counterparts in other regions
 Relative to end of 2013, own company optimism
decreased in all regions except for Asia
Duke University / SAICA / CFO Magazine
March 2014
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Top 5 Macro and Internal Concerns for African CFOs
Currency Risk, Political Risk, Working Capital Management, and Attracting Qualified Employees are
concerns throughout Africa. Other concerns vary by region.
Top 5 Macro Concerns
South Africa
1) Consumer Demand
2) Labor Instability
3) Currency Risk
4) Price Pressure from Competitors
5) Policy Uncertainty
Nigeria
1) Electricity Supply
2) Consumer Demand
3) Currency Risk
3) Policy Uncertainty
5) Inflation
5) Foreign Competition
Rest of Africa
1) Policy Uncertainty
2) Labor Instability
3) Currency Risk
4) Electricity Supply
4) Input Costs
4) Financial Market Regulation
Top 5 Internal Concerns
South Africa
1) Ability to Maintain Margins
2) Attracting & Retaining Qualified Employees
3) Maintaining Morale/ Productivity
4) Working Capital Management
5) Ability to Forecast Results
African Business Outlook
Nigeria
1) Working Capital Management
2) Attracting & Retaining Qualified Employees
3) Supply Chain Risk
4) Maintaining Morale/ Productivity
4) Ability to Forecast Results
4) Ability to Maintain Margins
Rest of Africa
1) Working Capital Management
2) Supply Chain Risk
3) Ability to Forecast Results
3) Balance Sheet Weakness
5) Attracting & Retaining Qualified Employees
5) IT Governance
Duke University / SAICA / CFO Magazine
March 2014
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Earnings and Cash Flow Utilization
South African CFOs expect an increase in all categories over the next 12 months though Revenue and
Earnings increases have slipped from last quarter
% Change Expected in Next
12 Months by Region
% Change Expected in Next 12 Months in
South African Companies
40
40
30
30
20
20
Q4 2013
10
Q1 2014
Rest of Africa
10
All Africa Avg
South African CFOs anticipate large increases in
R&D and Marketing spending while barely
increasing spend on Technology
 Expectations about Revenue, Earnings, and
Capital Spending have softened since last
quarter’s survey but are still projected to
increase by nearly 10%
African Business Outlook
Marketing
Capital
R&D
Technology
Dividends
Earnings
Revenue
Marketing
Capital
R&D
Technology
Dividends
Earnings
0
Revenue
0
Nigeria
Expectations higher outside of South Africa
 Revenue and earnings expected to increase by
10 - 15% on average
 Nigerian companies expect dramatic increases in
Tech spending with minimal increases in R&D,
Capital and Marketing spending
Duke University / SAICA / CFO Magazine
March 2014
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Mergers and Acquisitions Compared to World Regions
Fewer African companies anticipate making an acquisition, compared to other regions
Percent of Companies Planning to Acquire at Least
Part of Another Company in the Next 12 Months
35
African companies anticipate lower
acquisition rates compared to other
regions over the next 12 months
30
25
 South Africa anticipates 23.1% of
companies to acquire another company
20
• Only 7.1% of African firms will make an
international acquisition
15
 Among Nigerian companies making an
acquisition (12.5% of surveyed Nigerian
firms), all anticipate making an
international acquisition
10
5
0
United
States
Europe
Asia
Plan to Acquire
African Business Outlook
Latin
America
South
Africa
Nigeria
International Acquisition
Duke University / SAICA / CFO Magazine
March 2014
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Expected Borrowing Costs and Effects on Spending
60% of surveyed South African companies borrow externally and anticipate borrowing costs to
increase by 1.2% by the end of 2014. However, planned spending would not decrease substantially
unless rates increase by more than 4%*
Anticipated Change in Borrowing
Costs Over Coming 12 Months
% Increase in Borrowing Costs Before
South African Companies Will:
6
6%
13%
13%
6%
6%
25%
31%
-300 bps
5
-200 bps
4
+100 bps
3
+200 bps
2
+300 bps
1
+400 bps
-
+600 bps
No companies surveyed anticipate a decrease of
more than 300bps
 No CFOs expect borrowing costs to remain flat or
to change by -100bps, +500bps
Reduce Hiring
Reduce Capital Reduce Borrowing
Spending
On average, borrowing rates would have to increase by
over 4% before CFOs would reduce hiring, capital
spending or borrowing plans
 Companies plan to maintain hiring levels unless rates
increase by >5%
*Note: Only uses data from South African respondents. Data from other regions incomplete.
African Business Outlook
Duke University / SAICA / CFO Magazine
March 2014
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Does Uncertainty Affect Plans of African Businesses?
Uncertainty about the economy and government causes African businesses to reduce/delay capital
spending more than it affects other aspects of planning. Graphs below report uncertainty about …
Government Economic Policy
General Conditions
70
60
50
40
30
20
10
0
80
60
40
20
0
Reduce/Delay Reduce/Delay Increase Cash No Real Effect
Captial
Hiring
Holding
Spending
Reduce/Delay Reduce/Delay Increase Cash No Real Effect
Captial
Hiring
Holding
Spending
South Africa
Nigeria/Rest of Africa
South Africa
All Africa Avg
Domestic Political Situation
80
Nigeria/Rest of Africa
All Africa Avg
Regulatory Implementation
60
50
40
30
20
10
0
60
40
20
0
Reduce/Delay Reduce/Delay Increase Cash No Real Effect
Captial
Hiring
Holding
Spending
African Business Outlook
Reduce/Delay Reduce/Delay Increase Cash No Real Effect
Captial
Hiring
Holding
Spending
Duke University / SAICA / CFO Magazine
March 2014
Corporate Culture
All regions list “Customer Orientation” and “Integrity” as the two most important aspects of their
company’s culture and “Customer Orientation” as their top priority for improvement
Top 4 Most Important Attributes of Company’s Culture
1)
2)
3)
4)
South Africa
Customer Orientation
Integrity
Adaptability
Strategic Results Orientation
1)
1)
3)
4)
Nigeria
Customer Orientation
Integrity
Adaptability
Near-Term Results Orientation
1)
2)
3)
4)
Rest of Africa
Integrity
Customer-Orientation
Near-Term Results Orientation
Internal Transparency
Top 3 Corporate Culture Priorities for Improvement
South Africa
1) Customer Orientation
2) Adaptability
3) Strategic Results Orientation
Nigeria
1) Customer Orientation
1) Integrity
1) Adaptability
Rest of Africa
1) Customer Orientation
2) Internal Transparency
2) Detial Orientation
Importance of Having a Strong/Well-Defined Corporate Culture
South Africa
Nigeria
Rest of Africa
All Africa Avg
0
10
20
Very Important
African Business Outlook
30
40
50
Medium Importance
60
70
80
90
Small Importance
Duke University / SAICA / CFO Magazine
March 2014
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Do Real Estate Bubbles or American Monetary Tightening Affect Africa?
Only 9% of South African CFOs believe there is currently a real estate bubble in their country. A slight
minority anticipate that US Federal Reserves monetary tigthening will affect their firms
Anticipated Effect of US Federal
Reserve’s Quantitative Easing Taper on
Own Company Performance
Is There A Real Estate Bubble in South
Africa?
4% 3%
9%
Very negative
Yes
41%
No
None
52%
91%
Somewhat
positive
The vast majority of South African CFOs say there
is not a Real Estate Bubble in South Africa

Somewhat
negative
Though not shown in the graph, 90% of Chinese
CFOs and half of Latin American CFOs believe that
there is a real estate bubble in their home
countries.
No companies surveyed anticipate the QE Taper to
have a “very positive” effect on their organization
 A slight majority of South African companies do not
anticipate any effect attributed to the Taper
 Though not in graph, Asian and LatAm CFOs say US
Tapering will hurt their home country economies
* Note: Only uses data from South African respondents.
African Business Outlook
Duke University / SAICA / CFO Magazine
March 2014
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