MCCI Business Confidence Indicator
13 th Edition
2 nd Quarter 2013
I. BUSINESS CONFIDENCE INDICATOR FOR Q2 2013
Figure 1: The Business Confidence Indicator for all enterprises
On the basis of the quarterly business tendency survey, conducted
between 3 and 17 June 2013, we have noted a decline in the business
Decline of 4.5
percent in the
Indicator in the
2nd quarter of
confidence indicator in Mauritius in the second quarter of this year
Indeed, the index lost 4.1 points (4.5 percent) between April and June of
this year to stand currently at 87.5 points, which is well below the longterm
average of 100 basis points.
This decline in the index comes after a favourable first quarter of 2013.
This result shows that we are still in a period of crisis with latent
uncertainties suggesting that the economic performance will be lower
in the second quarter of 2013 compared to the same period in 2012, all
things being equal.
II. THE “BAROMETRE ECONOMIQUE” FOR Q2 2013
Figure 2: MCCI “BAROMETRE ECONOMIQUE”
- Present economic situation: still
bad, but improving
- Economic expectations: positive
- Present economic situation:
-40 -30 -20 -10 0 10 20 30 40
- Present economic situation:
- Economic expectations:
Cooling down/ Downswing
- Present economic situation:still
good, but deterirating
Economic expectations: negative
allows a short
of the evolution
presently 2 in the
upturn phase of
The economic climate barometer, based on the CESifo methodology,
allows us to see the evolution of the two variables of the business
confidence indicator, that is, the arithmetic mean of the assessments of the
current situation and economic expectations for the next three months.
The assessments on the present economic situation are positioned along the
abscissa, the responses on the economic expectations on the ordinate.
The correlation of the two climate components can be illustrated in a fourquadrant
diagram, defining the four phases of the business cycle.
Thus, using the medium term expectations of entrepreneurs we can assess
the present situation, and have a useful insight of the evolution of the
Mauritian economy in the short term.
According to the study, the business confidence indicator has worsened
during this quarter. The reason behind this fall is that the net opinion of
entrepreneurs on future perspectives, the first component of the index, is
Indeed, regarding the on the evaluations of the perspectives, the net
anticipation of entrepreneurs is at -15.9 percent. More than 40 percent of
entrepreneurs interviewed are anticipating a fall in the level of business
activity for the next quarter relative to the same quarter of last year.
Concerning the second component, the present economic situation, with
respect to turnover, during this particular quarter, the net opinion is
moderately positive at 2.3 percent, which has partially offset the general
decline of the index.
We are in the
phase of the
Nearly 30 percent of entrepreneurs interviewed have experienced stronger
sales performance during the second quarter compared to the same period
last year. Approximately 27 percent have noted a deterioration.
The correlation between these two components show that the indicator is in
the Cooling down/ Downswing quadrant of the barometer and is clearly
oriented downwards as far as future development is concerned.
After an ephemeral improvement during the first quarter, the perspectives
of the Mauritian economy seem to worsen once again.
III. FACTORS AFFECTING BUSINESS PERFORMANCE
Figure 3: Net assessment of entrepreneurs on the influence of selected factors
Competition in the
Opportunities to expand in
Access to capital
Availability of management
Government support for
Logistics and connectivity
A worsening of
to this decline
An analysis of the data allows us to identify "the deterioration of the
global environment and fierce competition in the market" as the two main
factors that have had a negative impact on business performance during
A large majority of entrepreneurs say that the uncertain global situation,
particularly in our key markets, and intense competition between
operators which are sometimes unfair, have had a negative impact on
Other factors have also had an impact. They are as follows:
Some elements have
during this quarter,
such as new
fiscal and monetary
Recurring problems with traffic congestion affecting
Staff turnover and the lack of qualified personnel
Problems of logistics and connectivity
The lack of government support for business
Nevertheless, there are some elements have facilitated business
during the quarter.
Entrepreneurs concede that significant opportunities have been
identified, particularly in the region and on the African continent.
Thus, they have increased their efforts to turn to these new markets in
order to continue to fuel their own growth. However, difficulties with
connectivity make this process quite complex.
An accommodative taxation, a policy of competitive exchange rates
and an open access to capital were other positive elements.
Figure 4: Entrepreneurs’ assessments on the evolution of investment for the next twelve months
compared to the same period last year
investment for the
In this quarter, entrepreneurs plan to reduce their investments over the
next twelve months. The average of their expectations is approximately
at negative 13 points.
More than 30 percent of respondents say they will reduce their level of
investment over the next twelve months compared to the previous
twelve months while about 18 percent are planning the opposite.
The vast majority of companies surveyed, nearly 85 percent, will
primarily focus on material investment, especially on machinery and
equipment (60 percent). Some 15 percent of respondents will prioritise
intangible investments, primarily research and development.
Figure 5: Employment prospects
On employment prospects, the net opinion of companies surveyed is
slightly positive; with a score of one point after an increase in the first
17 percent of respondents have indicated that they will increase their
personnel in the coming months following decisions to diversify and /
or expand their activities, and in certain cases , due to an increased
However, 16 percent of the respondents have indicated that they will
most probably resort to cuts in their staff. Half of those have replied
that they will resort to redundancies in light of the continued decline in
turnover while the other half will need to restructure in order to
continue their business.
VI. PRICING POLICY
Figure 6 : Evolution in the level of prices in Q2 2013
Fall in prices in
Concerning changes in the price level, the continuing trend of
disinflation is what can be noted in the second quarter of 2013. The
average evaluation of entrepreneurs on prices of goods and services is
negative, which indicates a fall in the general level of prices.
Indeed, on the question of the evolution of prices of goods and services
during the past three months, 35 percent of respondents reported that
they have had to lower prices in order to remain competitive in their
markets. Fourteen percent have increased theirs..
A majority, 51 percent of the entrepreneurs interviewed, have
maintained their prices.
Figure 7: Evolution in the level of prices for the next quarter
For the next quarter, we find that the downward trend is expected to
Net expectation of entrepreneurs on this variable is at -6 percent,
indicating a probable decrease in the level of prices in the next quarter.
control in 2013.
Although it appears that at first glance we can be pleased with the fall
in prices, a closer look reveals some cause for worry.
The reason behind this, according to entrepreneurs, is the fall in
activity. Entrepreneurs have indicated that they are having to reduce
their margins in order to keep their business afloat.
This will have an effect on profitability, which is a crucial variable in
the determination of investment.
The year 2012 was marked by the control of the level of prices
compared to 2011, and we saw the inflation rate dropping from 6.5 to
3.9%. For 2013, this trend will continue, all other things being equal.
VII. SECTORAL TENDENCIES OF THE BUSINESS CONFIDENCE
INDICATOR FOR Q1 2013
Figure 8: The Business Confidence Indicator by sector of activity
Commerce Manufacturing -1.9 Services
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013
For this quarter, apprehensions have reappeared in the economy. The
business confidence indicator is down in all sectors.
General fall in
indicator in all
A thorough analysis shows that it is the manufacturing sector that
recorded the largest decline.
After an improvement in the first quarter of this year, the confidence
indicator for this sector decreased again, at a rate of 5.7 percent, in the
The three variables used in the estimation of the indicator for this sector
are found to be unfavourable. Manufacturers concede that the
performance has been average for the second quarter, and anticipate a
ripple effect in the third quarter of this year.
In addition, stocks level is high. This may weigh on the financial ability of
the companies concerned, and therefore hinder capital investment or growth
This downward trend, if confirmed, will have a definite impact on the
development of this sector this year.
For the services sector, we have observed a deterioration in the business
confidence indicator. There is a decrease of 4.3 percent this quarter for this
sector of activity, following the sharp increase of 7 percent in the first quarter
Given the importance of this sector, which includes approximately 70
percent of our GDP, and its holistic reach spanning from tourism related
activities to outsourcing, this decline is particularly worrying.
If we want to find the path to strong and sustainable growth, this segment of
our economy must re-discover its bearings and vigor.
Finally, in the commerce sector, after a promising first quarter of 2013 with a
net increase of about 5 percent, the indicator declined by 3.6 percent in the
second quarter of this year.
Entrepreneurs of the sector have indicated that the wage compensation in the
public sector, as recommended by the PRB, has not had the desired effect on
their sales, and they anticipate a deterioration in business over the coming
To conclude, we can draw some observations from this study.
First, the latest business tendency survey shows that business confidence
deteriorated in the second quarter of 2013, following the temporary increase
observed at the beginning of the year. It currently stands at 87.5 points.
It is highly
will be lower
in 2013 than
in 2012, all
Since the first quarter of 2012, the index has been below the long term
average of 100 basis points, highlighting that we are still in a period marked
by latent uncertainties.
Second, it appears that no sector is spared. The decline is widespread across
the economy, with all sectoral indices a downward trend.
Third, the decline in confidence could have a negative impact on investment.
Indeed, the net evaluation of entrepreneurs of this variable is negative.
It is to be noted that the net opinion on investment is negative for commerce
and manufacturing, and positive for services.
Fourth, disinflation in this quarter, and falling prices in the next are expected
to continue; the net opinion of entrepreneurs to the question on the evolution
of prices in the next three months being negative.
The explanations given by entrepreneurs confirm the fall in activity. They are
highlighting about their obligation to minimize their margins in order to
maintain their businesses in their current situation.
This will have an impact on profitability.
Fifth, status quo should prevail concerning the level of employment.
This result is
There was a slight increase the score on hiring prospects, and this will
have a positive effect on employment this quarter if this trend continues
in the coming months.
The correlation of the two business climate components, “the present
economic situation "and “future expectations of entrepreneurs”, show
that we are in the downward phase of the economic cycle.
If this trend is confirmed in subsequent reports, the economic
performance of our country in 2013 will be affected and the economic
growth rate in 2013 will be lower than in 2012, all things being equal.
This result is a snapshot of the mindset of our entrepreneurs when
questions were asked and it will not remain constant. In the days and
months ahead, depending on new data, the business confidence
indicator is made to be changed either up or down.
ANNEX – THE METHODOLOGY
of the OECD
The « MCCI Business Confidence Indicator » is a composite indicator of
business climate in Mauritius summarizing, in a single variable, the
simultaneous changes of several variables and thus allows the transcription
of the state of mind and morale of business leaders. The higher it is the
more confident are the businesspersons about the economic outlook, and
The objective is to collect information on the current economic situation
and its evolution in order to have a holistic view of the business world.
The methodology used to construct this index of the business climate is one
recommended by the OECD 1 , namely:
• Preparation of a questionnaire with qualitative and trimodal questions,
• Using harmonized processing techniques,
• Construct a sample representing 20 percent of the members of our
• Conduct a business survey on the sample in a maximum period of three
• Assign weights to responses according to the size of the enterprises
To follow the evolution of the indicator, this study will be performed
repetitively on the same sample. In our case, we have opted for a quarterly
1 OECD : Business Tendency Surveys – A Handbook, 2003
Authors of this publication:
Dr. Renganaden Padayachy