Transcript Analysis – in English

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, 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: 60
 Of which, 55 from South Africa, 3 from Nigeria, and 2 from other parts of Africa
 In certain segments, responses from Nigeria and other parts of Africa were excluded from analysis as the small
number of respondents may skew results. South Africa results are extrapolated to represent Africa.
 Data from Q3 ‘15 are not available in this report. References to “last quarter” should be interpreted as Q2 ‘15.

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
Dec 2015
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Sentiment Regarding Domestic Economy
African optimism about the next 12 months remains low
South Africa, Last Four Quarters
Trends in African Optimism
Q4 '14
Q1 '15
No Change
CFOs are less optimistic about the domestic
economy
 Compared to Q2 ‘15, same number of African
CFOs (77%) report being less optimistic about
the domestic economy this quarter
Less Optimistic
Q2 '15
More Optimistic
Q4 '15
0% 10% 20% 30% 40% 50% 60% 70% 80%
When ranked on a 100 point scale, the African Optimism Index (for the economic prospects of the continent
over the next year) increased from 42.5 in Q2 2015 to 49.3 in Q4 2015.
African Business Outlook
Duke University / SAICA / CFO Magazine
Dec 2015
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Own Company Sentiment
A decent number of African CFOs are optimistic about their own companies, despite being less
optimistic about the overall economy.
Own-Company Optimism, Last 4 Qtrs
Own-company optimism has improved
Q4 '14
Q1 '15
No Change
 Compared to last quarter, there has been a
decrease in the percentage of African CFOs that
are more optimistic for their own companies. In
contrast, there has been a greater reduction in
the percentage of African CFOs who are less
optimistic for their own companies. On net, the
optimism is more or less holding steady.
Less Optimistic
Q2 '15
More Optimistic
Q4 '15
0%
10% 20% 30% 40% 50% 60% 70%
When ranked on a 100 point scale, the Own-Company African Optimism Index (for the economic prospects over
the next year of each CFO’s own company) reduced from 61.4 in Q2 2015 to 63.5 in Q2 2015
African Business Outlook
Duke University / SAICA / CFO Magazine
Dec 2015
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Top 10 Most Pressing Concerns
CFOs in Nigeria and South Africa feels that economic uncertainty, currency risk, and government
policies are the most pressing concerns
South Africa
Nigeria
Economic uncertainty
Economic uncertainty
Currency risk
Currency Risk
Government policies
Government policies
Regulatory requirements
Weak demand for products and
services
Employee morale
Weak demand for products and services
Employee productivity
Access to capital
Volatility of political situation
Rising input or commodity costs
Access to capital
Difficulty of attracting/retaining
qualified employees
Inflation
African Business Outlook
Cost of borrowing
Corruption and white collar crime
Employee morale
Duke University / SAICA / CFO Magazine
Dec 2015
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Forecast of Financial Performance in 2016 (One-year ahead)
CFOs in South Africa and Nigeria estimate the following changes will occur in their companies during
the next 12 months.
South Africa
Nigeria
Revenue (+ 7.3%)
Cash on the balance sheet (-)
Wages/Salaries (+7.0%)
Capital spending (+)
Technology spending (+7.4%)
Earnings (+)
Healthcare costs (+6.0%)
Wages/Salaries (+)
Earnings (+9.8%)
Prices of products (+)
Cash on the balance sheet (-5.5%)
Worker productivity (+)
Marketing/advertising spending (-7.4%)
Revenue (+)
Number of domestic temporary employees (+3.2%)
Healthcare costs (+)
Dividends (+6.6%)
Marketing/advertising spending (+)
Prices of products (+5.3%)
Technology spending (+)
African Business Outlook
Duke University / SAICA / CFO Magazine
Dec 2015
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Factors affecting capital spending plans
African CFOs indicate that the following factors will affect capital spending plans over the next year
compared to a “normal” economic environment
South Africa
Price of fuel
Currency valuation
New or anticipated
regulatory requirements
Slowdown in China
African Business Outlook
Nigeria
Price of fuel
Interest rates
New or anticipated
regulatory requirements
Duke University / SAICA / CFO Magazine
Dec 2015
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Aging of Fixed Assets
A significant percentage of South African CFOs report a moderate increase in the age of their
company’s fixed assets. 34% indicate that aging of fixed assets is a drag on productivity growth.
Increases in new spending on fixed assets could reverse both of these trends.
Changes in Age of Fixed Assets
7.40%
Does Aging affect Productivity Growth?
9.30%
14.80%
34.40%
14.80%
65.60%
53.70%
+2=Large increase in age
+1=Moderate increase
-1=Moderate decrease in
-2=Large decrease in age
African Business Outlook
0=No change
No
Duke University / SAICA / CFO Magazine
Yes
Dec 2015
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Effect of Business Changes on Capital Investments
57% of South African CFOs report that the nature of their businesses will require more intense capital
expenditures in future years.
0.00%
5.60%
22.20%
37.00%
35.20%
-2=Much less capital investment will be required
-1=Moderately less
0=No change
+1=Moderately more
+2=Much more
African Business Outlook
Duke University / SAICA / CFO Magazine
Dec 2015
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Effect of Increased Payouts on Corporate Investments
Most South African CFOs believe that increased payout (dividends, share repurchases) do not have an
effect on corporate investments. 41% believe that payout does constrain investment.
9.10%
31.80%
59.10%
2=Yes, a lot
African Business Outlook
1=Yes, a little
0=No
Duke University / SAICA / CFO Magazine
Dec 2015
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Currency Devaluation
African CFOs believe that there currencies will devalue relative to the US dollar (USD) in 2016.
0
Nigeria
South Africa
-0.5
-1
-1.5
-2
-2.5
-3
-3.5
-4
-4.5
-5
African Business Outlook
Duke University / SAICA / CFO Magazine
Dec 2015
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Rate of Productivity Growth
A slight majority of South African CFOs believe that the rate of growth in their firm’s productivity is
slowing.
0.00%
5.50%
41.80%
30.90%
21.80%
-2=Slowing a lot
-1=Slowing moderately
+1=Accelerating moderately
+2=Accelerating a lot
African Business Outlook
0=No change
Duke University / SAICA / CFO Magazine
Dec 2015
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Effect of “Automation and Technology Use” on Productivity Growth
South African CFOs believe that automation and technology has improved the growth rate of
productivity within their companies.
17.10%
19.50%
63.40%
1=Very Positive
African Business Outlook
2=Positive
3=No impact
4=Negative
5=Very Negative
Duke University / SAICA / CFO Magazine
Dec 2015
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Effect of “Process Change” on Productivity Growth
South African CFOs believe that “process change” has a positive effect on the growth rate of
productivity within their companies.
4.80%
14.30%
21.40%
59.50%
1=Very Positive
African Business Outlook
2=Positive
3=No impact
4=Negative
5=Very Negative
Duke University / SAICA / CFO Magazine
Dec 2015
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Effect of “New Business Model” on Productivity Growth
South African CFOs believe that “new business model” has a positive effect on the growth rate of
productivity within their companies.
7.10%
14.30%
28.60%
50.00%
1=Very Positive
African Business Outlook
2=Positive
3=No impact
4=Negative
5=Very Negative
Duke University / SAICA / CFO Magazine
Dec 2015
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Effect of “Unit Labor Costs” on Productivity Growth
South African CFOs believe that “unit labor costs” has no effect or a negative effect on the growth
rate of productivity within their companies.
2.30%
15.90%
31.80%
50.00%
1=Very Positive
African Business Outlook
2=Positive
3=No impact
4=Negative
Duke University / SAICA / CFO Magazine
5=Very Negative
Dec 2015
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Effect of “Economic Conditions” on Productivity Growth
South African CFOs believe that “economic conditions” has no effect or a negative effect on the
growth rate of productivity within their companies.
2.30%
18.20%
25.00%
54.50%
1=Very Positive
African Business Outlook
2=Positive
3=No impact
4=Negative
5=Very Negative
Duke University / SAICA / CFO Magazine
Dec 2015
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Effect of “Currency Valuation” on Productivity Growth
South African CFOs believe that “currency valuation” has no effect or a negative effect on the growth
rate of productivity within their companies.
2.40%
7.10%
11.90%
35.70%
1=Very Positive
African Business Outlook
42.90%
2=Positive
3=No impact
4=Negative
5=Very Negative
Duke University / SAICA / CFO Magazine
Dec 2015
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Effect of “Regulation” on Productivity Growth
South African CFOs believe that “regulation” has no effect or a negative effect on the growth rate of
productivity within their companies.
2.40%
11.90%
4.80%
28.60%
52.40%
1=Very Positive
African Business Outlook
2=Positive
3=No impact
4=Negative
5=Very Negative
Duke University / SAICA / CFO Magazine
Dec 2015
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Effect of “business disruption” on Productivity Growth
South African CFOs believe that “business disruption” has a negative effect on the growth rate of
productivity within their companies. Business disruption include external events such as bad weather,
political turmoil, and supply chain interruptions.
2.30%
20.90%
25.60%
51.20%
1=Very Positive
African Business Outlook
2=Positive
3=No impact
4=Negative
Duke University / SAICA / CFO Magazine
5=Very Negative
Dec 2015
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Return on Assets and Capacity Utilization
South African companies expect an reduction in ROA over the next on year and an increase in
capacity utilization in the second half of 2015.
South Africa
USA
Europe
Asia
Latin America
Approximate ROA in 2014
10.1%
9.8%
9.4%
8.3%
10.1%
Expected ROA In 2015
10.2%
10.5%
11.1%
7.1%
9.5%
% capacity in 1H 2015
72.9%
73.2%
68.9%
84.1%
72.8%
% capacity planned for 2H of 2015
74.1%
72.3%
55.7%
85.9%
70.5%
Return-on-Assets
Capacity Utilization
African Business Outlook
Duke University / SAICA / CFO Magazine
Dec 2015
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