New research from the Grant Thornton International Business Report (IBR) indicates that businesses in mature economies are betting on future growth, finally releasing their cash reserves and beginning to invest again. This comes as global business optimism, spurred on by improving order books, is up to its highest level since early 2011. The investment mood change is welcome evidence of businesses deciding that now is the time to lay the foundations for growth.
Local businesses expect to invest in new buildings at the growth of 44 percent compared to quarter 4 of 2012 which was at 26 percent. South Africa had a difference of 2 percent decrease from 2012 quarter 4 which was at 23 percent. In quarter 1 of 2012, Botswana was at 66 percent in expecting to invest in plant machinery compared to this year`s 50 percent.
The report also indicates that Botswana is at position one with 86 percent as they anticipated an increase in selling prices in the next 12 months, with Argentina at position two at 77 percent while neighbouring South Africa is at 69 percent which is an increase on their side compared to quarter 4 2012 when they were at 63 percent.
This did not seem to cause alarm amongst the business community as their optimism concerning increase in salaries was at 94 percent in Botswana which was at the same level with South Africa though they differed immensely when it came to creating employment. Neighbouring South Africa stood at 35 percent and Botswana 52 percent while Georgia had more promise of 76 percent in creating employment.
Ed Nusbaum, Global CEO of Grant Thornton, said: “Business leaders are feeling more confident about the macroeconomic environment and are increasing investment in the future growth of their operations. It’s a sign that the large corporate cash reserves we know had been building around the world since 2008 are being unshackled.
“With the economic outlook so uncertain, business leaders have understandably adopted a ‘wait and see policy’ with regard to investment. This inertia has weighed heavily on growth in recent times and has seen corporate cash reserves climb to over $2 trillion in North America alone . This considerable investment firepower could now prove to be a potent force in driving growth in mature economies.”
In the European Union (EU), 44 percent of business leaders now plan to increase investment in plant and machinery in the coming year, up from 26 percent three months ago. Businesses in the G7 (34 percent, up 7 percentage points), North America (33 percent, up 5) and the PIGS economies (42 percent, up 27) all report strong rises in investment expectations.
Ed Nusbaum added: “The world’s largest economies and those which have suffered the most in the last few years are unified by an outlook brighter than we’ve seen for some time. Fears around the ‘fiscal cliff’ dampened US business confidence in Q4 and avoiding it gave a boost to businesses ÔÇô although of course the sequester of automatic spending cuts has since come into effect. In Japan, there is clearly a feeling that the new prime minister and governor of the central bank can return the economy to growth. China meanwhile looks set to outstrip its growth targets in 2013.
“However, the signs of growing demand, business confidence and investment plans are still developing. Full economic health is still some way off. The eurozone’s period of stability has recently been unsettled by tension over the proposed bailout of the Cypriot banks. This incident alone shows how fragile confidence ÔÇô and the investment plans that come with it ÔÇô remains. Policymakers should be wary not to undermine it.”
