Paying more for less‚ coupled with uncertainty‚ impacts SA economy

Two-thirds (65.8%) of South African business executives’ operations and business decisions have been impacted by the nation’s “turbulent” economy and uncertainty about its future direction.

This is according to the International Business Report (IBR) from Grant Thornton‚ which provides tracker insights from around the world on a quarterly basis. The latest data reflects findings from business executive interviews held between September and December 2016.

When executives were asked to outline the ways in which economic uncertainty had affected their business decisions‚ 58% stated they were delaying business expansion plans‚ while 47.5% were putting off investment decisions. Nearly one-third of these executives (29.8%) were considering investing offshore‚ possibly in a more stable business environment and 23% were weighing up decisions to sell their business.

 “We’ve been tracking economic uncertainty and its impact on SA business executives for a long time‚” says Gillian Saunders‚ head of Advisory Services at Grant Thornton South Africa. “It’s concerning that such a huge proportion of our country’s corporate world is directly impacted by this instability.

“Delayed business decisions‚ stalling company growth and considerations to invest offshore will dampen our GDP growth even more.”

Poor Government service delivery also negatively affects SA business growth.

As part of the Q4 IBR survey‚ South African privately held business executives were asked how their business had been affected by Government service delivery or regulatory requirements in the past six months.

Of the executives surveyed‚ 62% stated that government service delivery had negatively affected their business while just 9% had been positively affected by this.

“Service delivery should be fully functioning across all major city nodes‚ all the time. It is disappointing when government’s delivery of basic needs and infrastructure impacts the functionality of a business‚” said Saunders.

When executives were asked to outline which elements in particular were negatively affecting their business‚ 57% stated increased service costs‚ 53% stated disruption to supply of utilities‚ and 49% cited the cost of red tape and legislative compliance.

While SA’s optimism outlook remains underwhelming‚ the global situation is bouncing back‚ according to the survey by the assurance and tax company.

Grant Thornton said when business leaders around the world were asked how optimistic they were about the outlook for their own country’s economy for the coming 12 months‚ a strong increase was reported internationally for the fourth quarter of 2016‚ as the world headed into 2017.

“....Globally‚ business optimism at the end of Q4 2016 stands at net 38%. This is an increase of 5 percentage points from Q3 and the highest level since Q3 2015.

 “In the US‚ optimism increased from 43% to 54% — and the trend is repeated around the globe. The world’s two other big economic blocs‚ China (30% to 46%) and the EU (28% to 34%)‚ reported similar jumps.

“But South Africa’s optimism levels remained stagnant and the outlook for the next 12 months was underwhelming. South African businesses were – at the end of December 2016 – just a net 6% optimistic‚ which is 4 percentage points down on Q3’s 10% optimism recorded at the end of September last year.”

This year has the potential to deliver increased optimism.

“South Africa has good economic growth potential in 2017. The massive drought is over for most of the country which will improve South Africa’s agriculture returns and global commodity prices are rallying somewhat along with generally improved outlook for global growth. Electricity supply is stabilising and the rand‚ although stronger‚ is still at reasonable values‚” said Saunders. “These are just a few improvements we’ve seen as we start the year. Let’s hope the good news keeps coming‚ that optimism continues to grow as our nation’s economy begins to recover.”