Each year Ernst & Young issues a bi-annual Capital Confidence Barometer which is a regular survey of senior executives from large companies around the world. The survey conducted by the Economist Intelligence Unit (EIU), gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their capital agenda.
According to Ernst and Young’s 8th Bi-annual Capital Confidence Barometer, conducted for the period April 2013 to October 2013, 81 percent of the senior executives in the MENA region say the current regulatory environment is conducive for business growth.
Phil Gandier; “There is a clear positive sentiment amongst respondents in MENA on regional economic growth, particularly in regard to corporate earnings growth and short term economic stability. The favourable regulatory environment and improving confidence across the region could be possible drivers of the increased appetite for acquisitions and will hopefully encourage companies to create more jobs and to further grow their businesses.” — Phil Gandier, MENA Head of Transaction Advisory Services, Ernst & Young
The report has indicated positive sentiments concerning the global economy and the MENA economy growth. The major findings from the report are as follows:
- Since the last survey in October 2012, respondents exhibited positive expectations regarding global economic growth, corporate earnings and employment levels, and significantly more positive on credit availability and improvement in short-term market stability
- 90% of the respondents expect the local MENA economy to grow in the next 12 months and 50% of the companies surveyed believe that growth will exceed 3% over the next 12 months.
- Globally, 29% of the respondents expect to pursue acquisitions in the next 12 months compared to 46% in MENA. The activity concerning acquisitions is particularly more positive in the MENA region, when compared to business interest six months back, owing to an increase in number and quality of opportunities.
- 90% of respondents in Saudi Arabia believe that the global economy is either improving or is stable and 97% are confident in economic growth in Saudi Arabia.
- 5% of Saudi respondents expect their companies to create jobs or hire talent in the next 12 months.
- 64% of UAE respondents believe that the local economy continues to improve, and 36% believe it to be stable.
- Compared to 88% of the respondents expressing confidence in the Egyptian economy in October 2012, only 40% revealed positive expectations in the latest survey.
- Confidence in the local Qatari economy has also decreased over the last six months, with the number of respondents who believe the local economy is slowing down rising to 20% compared to 10% in Oct 12.
The survey also gauged the preference for cash transactions throughout the MENA economy and revealed that MENA respondents have high cash liquidity.
- 53% of the respondents stated that they will use cash as the primary source to fund deals in the next 12 months, whereas this figure was a mere 29% in October 2012.
- Compared to 60% of the respondents planning to use debt as the primary source of deal financing over the next 12 months, six months ago, this figure has now dropped to 16%
- Majority of the respondents view credit availability as stable or improving by 47% and 40%, respectively.
- 54% of the companies with excess cash plan to employ organic growth strategy, their top two drivers for organic growth strategy being research and development/product introductions and more rigorous focus on their of core products.
Phil Gandier; “With the significant increased appetite for acquisitions in the MENA region coupled with the high number of respondents indicating the ability to finance with cash, we may see the MENA markets capitalizing on these opportunities. It is encouraging to see that the MENA countries have the resources and confidence to help boost performance in their local transaction markets and now might be the right time for them to invest and focus on growth.”