Grant Thornton quarterly tracker data further fuels reports of economic uncertainty in SA and globally
Political instability, overregulation and red tape, high crime rate continue to affect business growth and expansion in SA.
South African privately held businesses are feeling the pressures of continued constraints which are directly restricting expansion with 40% of businesses citing a lack of skilled workers and 39% indicating excessive regulation and red tape as major concerns. A total of 19% of businesses surveyed lamented a shortage of orders, caused by a reduction in demand.
The Grant Thornton International Business Report (IBR) quarterly research data for the first quarter of 2013 confirms current global economic reports and analyst concerns that a continued international slowdown, coupled with additional issues locally constraining business growth, are all having a major impact on South African businesses.
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The Grant Thornton data also revealed that 57% of business executives are being negatively impacted by poor government service delivery with 41% stating the issue as utilities (water and electricity supply), 23% billing issues and 21% of businesses citing roads (potholes, traffic lights).
An additional 14% of respondents stated being impacted by a combination of labour strikes, poor payment from government and tender fraud, quoted as core issues in the “other” category.
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Grant Thornton’s quarterly International Business Report (IBR) research data for the first quarter of 2013 provides tracker insights into the views and expectations of over 12 000 privately held businesses surveyed in total per year across 44 economies. The Q1 data for IBR to March 2013 also highlights regional and national perceptions of privately held businesses regarding crime, service delivery and political climate for South African business owners.
“Our latest research is in line with many media reports currently being published in the press,” says Deepak Nagar, national chairman of Grant Thornton South Africa. “The weight of the global economic downturn is becoming unbearable and additional local pressures are not helping at all.”
Just two weeks ago, the Global Entrepreneurship Monitor revealed that onerous labour laws, crime and continued corruption were directly hindering the entrepreneurial spirit in South Africa.
“If South Africa wants to promote entrepreneurship and successfully meet the National Development Plan’s objectives for job creation, bringing additional regulations and restrictions to small and medium businesses is certainly not going to help matters,” continues Nagar. “Furthermore, failing to properly address issues of corruption and crime is a critical concern for our country, particularly in the lead up to the national elections in 2014.”
Political uncertainty continues to impact business decisions
When business executives were asked whether uncertainty about the future political direction of South Africa is impacting current business decisions, 36% said yes. Of the executives who concurred that political uncertainty is a concern, 32% stated that present conditions were causing them to put off important investment decisions, with 19% placing investments offshore rather than within South Africa and 7% of these executives are seriously considering emigration or selling their businesses.
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“On a positive note, political uncertainty has spurred business executives in South Africa to review their B-BBBEE status, with our Q1 research revealing that 29% are currently working hard to improve their B-BBBEE status,” adds Nagar. “Ensuring that companies are doing more than just ticking the boxes for B-BBBEE compliance is promising – it means that the legislation is beginning to have a direct and measurable impact on a company’s bottom line.”
Crime & security
Sadly, the impact of crime on SA businesses seems to be gaining momentum again, with 57% of business executives, their staff or family of staff directly affected through a contact crime incident in the past 12 months. Contact crime is defined in the research as housebreaking, violent crime, road rage or hijacking.
This figure has increased 11 basis points since 2011(46%) KwaZulu-Natal and Eastern Cape regions recorded the highest impact, both at 60%.
“While the figure of 57% has dramatically declined since our initial data which was recorded in 2007 (84%), it is devastatingly concerning to see this statistic climbing again,” says Nagar.
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In terms of the financial burden that crime has on SA businesses, the IBR data for Q1 2013 highlighted that a startling 66% of business leaders who stated crime as a real concern in the past year reported that they had experienced increased costs for security systems in their organisations.
When asked if any executives had given serious consideration to emigrating, only 16% stated that they were considering it (2009: 30%).
Glimmer of hope on the horizon
Business owners in South Africa continue to be positive about the next 12 months with 48% of executives surveyed stating that they are optimistic about business prospects for 2013. This figure is also marginally higher than the executives in the BRIC region and twice as optimistic as the global statistic (SA – 48%; BRIC – 47%; Global 20%). However, SA business confidence is significantly down from 2010 (60%).
For the BRIC region, the results reveal that China is the country which is pulling the economic region’s optimism down, with Chinese business executives recording 21% optimism figure overall.
