Quarterly Business Confidence Index unveiled in Zimbabwe(1)
(Harare) – Zimbabwean businesses have a new tool at their disposal following the launch of the Quarterly Business Confidence Index (BCI). The BCI is a composite economic index that measures the amount of optimism or pessimism that business managers feel about the prospects of their companies or organizations. It can be used as a tool for predicting the economic cycle, providing qualitative information useful for monitoring the current economic situation and as advanced warning of turning points in economic activity.
The CZI BCI has been developed by the International Trade Centre (ITC) for the Confederation of Zimbabwe Industries (CZI) to help facilitate the implementation of national policies to unlock sustainable growth and boost the competitiveness of Zimbabwean businesses. The Index is financed by the European Union, under its Trade and Private Sector Development Programme (TPSDP) for Zimbabwe, being implemented by ITC.
Speaking at the launch of the BCI at Rainbow Towers, Harare, on 7 October 2015, Minister of Industry and Commerce Honourable Mike Bimha welcomed the Index’s contribution to evidence based policy dialogue in Zimbabwe. ‘The BCl survey is a significant step towards identifying and addressing doing business challenges, which will, in the long run, unlock and deliver sustainable competitiveness and growth of the country’s industry in general, and the manufacturing sector in particular,' he said.
‘The Index will assist in facilitating the implementation of sound national policies that address the factors affecting the doing business environment in Zimbabwe’ Mr. Busisa Moyo, current President of the Confederation of Zimbabwe Industry, and CEO at United Refineries Ltd said. ‘With the BCI we now have a diagnostic tool that allows us to take a pulse of the sentiment among senior executives on the business climate four times a year. This empowers CZI to give feedback supported by empirical evidence to its clients and provides a guide to action for policy recommendations.’
Marcos Vaena, ITC’s Chief of Enterprise Competitiveness said that the index will contribute significantly to achievement of the TPSDP objectives in Zimbabwe by capacitating CZI to provide relevant services to manufacturing enterprises, and helping them take advantage of business, trade and investment opportunities under the iEPA. ‘The Index is an effective tool for taking the pulse of the manufacturing sector, strengthening CZI authority on the manufacturing sector, and facilitating evidence based recommendations towards policy dialogue for competitiveness’ he said.
Developed by ITC in partnership with Professor Christian Haedo from the University of Bologna, the BCI is based on the Japanese Tankan Sentiment Index, which is used by many countries to establish similar indicators, including the Spanish BCI and the German IFO. The index takes into full account core recommendations for the harmonized system of business tendency surveys of the Organization for Economic Co-operation and Development (OECD), which encourages trade associations to adopt a standard framework.
During a panel discussion at the launch, experts assessed the results of the first survey of the BCI, which has a reference period of April to June 2015. Participants at the launch included private sector players from the manufacturing and banking sectors, as well as representatives of the Reserve Bank of Zimbabwe, the Zimbabwe National Economic Consultative Forum and various government ministries
Purchasing Manager’s Index
A Purchasing Manager’s Index (PMI) has also been produced for CZI, based on the methodological approach of Markit Group, which conducts performance management indicators in more than 30 countries, and that of the United States-based Institute for Supply Management since 1948.
'The PMI allows us to monitor or check the trajectory of economic performance quarterly so that interventions to improve economic direction can be recommended and implemented,' Mr. Moyo said.
The overall quarter on quarter BCI for the reference period April to June 2015 was -33.9 and the year on year BCI -37.2 indicating that confidence is low. Businesses had the most negative sentiment in relation to the same quarter in 2014, a less negative sentiment for the reference quarter, and far less for the same quarter in 2016. This implies a less negative outlook for the future. Larger companies of 100 employees or more had the least negative sentiment, and by sector, the textiles and clothing sector had the least negative result. The only positive sentiment observed was in the Midlands region, where result of 7.2 was recorded for the Expectation Diffusion Index, implying that Businesses have a positive outlook for 2016. On average, the BCI components revealed the greatest proportion of businesses having negative sentiments with regard to the economic situation of the country, and the largest proportion with positive sentiments regarding profitability. Among the components, the least negative are profitability and investment, in this order. There is therefore low confidence in the economy at the country level. However, the sentiment is better at the sector level and best at the establishment.
All the Purchasing Manger’s Index (PMI) component results for the reference quarter were below 50, implying that manufacturing is declining. With an overall value of 43.1, which is close to the recessionary threshold of 42, it will be important to observe the PMI for the next period July to September to determine whether this is a point in an upward or downward trend. The key components that brought down this index included employment at 38.4, and the orders book at 39.1.
These are only the first survey results, the baseline. Trends over a reasonable period of time will provide a clearer picture.
Notes to the Editor:
About the Trade and Private Sector Development Programme
The EU’s TPSDP supports Zimbabwe’s economic recovery, diversification and poverty reduction by strengthening the private sector, business associations and intermediary organizations. The programme also aims to strengthen the capacity of all actors involved in the implementation of the Interim Economic Partnership Agreement (i-EPA) between Zimbabwe and the EU, including the Ministry of Industry and Commerce.
About the Confederation of Zimbabwe Industries
CZI represents the Zimbabwe manufacturing sector and is one of the key intermediary organizations capacitated through the TPSDP project, in areas including business confidence index development, management and interpretation of the results.
About the International Trade Centre
ITC is a joint agency of the World Trade Organization and the United Nations. ITC assists small and medium-sized enterprises in developing and transition economies to become more competitive in global markets, thereby contributing to sustainable economic development within the frameworks of the Aid-for-Trade agenda and the Global Goals for Sustainable Development.
P: +41 22 730 0145
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E: hetland [at] intracen.org