Q3 Grant Thornton International Business Report data highlights crime, service delivery, political climate and Companies Act for SA business owners
1 November 2011
More than 50% of Western Cape privately held businesses are satisfied with government service delivery, reveals Grant Thornton.
Neil Miller, joint managing partner at Grant Thornton Cape, this morning released Grant Thorntons third quarter data for the 2011 International Business Report on business owners perceptions. The Grant Thornton International Business Report (IBR) provides quarterly insight into the views and expectations of over 11,000 businesses surveyed in total per year across 39 economies.
It is encouraging that over half of the provinces business owners are content with government service delivery, said Miller. But it is still concerning that 49% of Western Cape executives have been negatively affected by poor government service delivery.
Figure 1. Regional breakdown Has your business been negatively affected by poor Government service delivery?
Over a third of Western Cape businesses were specifically negatively affected in the area of utilities, i.e. water and electricity and 21% stated that billing issues were impacting normal business function.
The percentage of businesses negatively affected by government service delivery is even worse in the Eastern Cape and KwaZulu-Natal where 59% and 51% respectively stated that poor government service delivery was impacting business operations. In Gauteng, 46% of businesses were hampered by poor government service delivery.
Figure 2. Regional breakdown What is the greatest negative impact on your business in respect of government service delivery?
It is particularly encouraging that the number of Western Cape respondents considering emigration has come down dramatically in the past three years, from 27% in 2009 to 10% this year, says Miller.
However, of the 10% in the Western Cape who have considered emigrating, 69% stated they would do so because of the high crime rate.
Notwithstanding this, IBR 2011s third quarter data reveals that the Western Cape has the lowest number (42%) of businesses whose staff or immediate family members of staff have been affected by crime compared to other provinces. This statistic is on a downward trend, with 2011 data 7% lower than what was recorded last year.
Figure 3. Regional breakdown In the past 12 months have you, your staff or family of staff been affected by the threat to personal security?
Miller believes the five-year downward trend for businesses affected by crime nationwide is very encouraging, with data for South Africa indicating a 35% drop since 2007, but he points out that the national average of 49% recorded for 2011, is still too high.
Despite the countrys daily news headlines, the majority of business owners in South Africa (70%) do not feel that the political uncertainty in the country is having an impact on their business decisions. However, of the 30% who do believe that political uncertainty is having a negative impact on business decisions, 38% say that it is causing them to delay making important business investment decisions.
At this fragile stage of the economic recovery, a growing economy such as South Africa cannot afford any indecision regarding investment in business, says Miller.
New Companies Act
Decision making as to how to respond to the New Companies Act still seems a confusing issue for most businesses. During the third quarter of 2011, 46% of business owners in South Africa consider themselves well informed about the Act, which came into effect on 1 May 2011. This is an improvement compared to Q2 IBR, when this question was first raised and 40% of private business owners admitted to being well informed.
When asked if business owners believe they should be audited or reviewed under the New Act, 57% of businesses owners believed they require an audit and 8% believe they need a review. A total of 35% of SA business owners surveyed during Q3 believe that neither form of financial reporting is required.
This is an indication of confusion and lack of knowledge in the business environment that is not conducive to the growth and sustainability of businesses, said Miller.
Macro economic factors impacting business in South Africa
Global tracker elements Q3 economic update
|IBR Quarterly tracker topic ||Question asked ||Q3 - 2011 perceptions |
| Crime ||In the past 12 months have you, your staff or family of staff been affected by the threat to personal security? ||49% YES (2011) |
55% YES (2010)
| ||In what way has the threat to personal security affected your business? ||Increased cost of security: 46% |
Decreased motivation: 18%
Decreased productivity: 17%
Loss of staff:9%
Loss of customers: 8%
| Government service delivery ||Has your business been negatively affected by poor government service delivery? ||Yes - 51% |
No - 49%
| ||What is the greatest negative impact on your business of government service delivery? ||Utilities - i.e. gas and electricity: 37% |
Billing issues e.g. rates and taxes: 17%
Roads e.g. potholes and traffic lights: 18%
| Political climate ||Is uncertainty about the future political direction of the country impacting your business decisions? ||Yes: 29% |
| ||In what ways has uncertainty about the future political direction of the country impacted your business decisions? ||Putting off investment decisions (37%) |
Considering investing in off shore rather than in South Africa (21%)
Seriously considering emigration (8%)
Considering selling the business (8%)
Improving BEE status (5%)
| Companies Act ||How well informed are you about the new Companies Act? ||Well informed: 46% |
Poorly informed: 33%
Global perceptions from over 11 000 business owners are tracked quarterly.
The Q3 rolling average economic data relating to Grant Thornton Internationals Optimism / Pessimism Index, shows that South Africas optimism balance of +63% recorded during the third quarter of 2011 has improved from the +60% recorded for the same period last year. This is against a global optimism balance of just +22% and BRIC optimism of +47%.
When executives were asked to explain why theyre optimistic about future business prospects, data reveals that 69% of SA business owners expect an increase in revenue, 59% expect improvements in profitability and 57% predict that selling prices will improve in the months ahead.
Businesses were expecting a slump in South Africa following a buoyant 2010 FIFA World Cup year, but IBR data indicates business sentiment remains positive, said Miller.
For the fifth consecutive year, the greatest constraint to business expansion in South Africa continues to be the lack of availability of a skilled workforce with 36% of business owners noting this as a challenge. Over-regulation is the second biggest constraint (34%) for businesses in South Africa.
The BRIC countries have stated the same concerns as South Africa in terms of factors which constrain business performance. BRIC averages recorded during Q3 for IBR 2011 indicate that 41% of business owners lament the lack of available skills and 35% view over-regulation as a constraint.
Globally an average of 32% of business owners are most constrained by a shortage of orders and reduced demand for products. The number of business owners struggling with a lack of a skilled workforce (26%), increased from last year when 21% cited this as a constraint.
For more information contact
Joint Managing Partner
Grant Thornton Cape
T +27 21 417 8800
National Marketing Manager
Grant Thornton South Africa
T +27 (0)11 322 4593 | M +27 (0)82 492 4281
The research is carried out primarily by telephone interview lasting approximately 15 minutes with the exception of Japan (postal), Philippines and Armenia (face to face), mainland China and India (mixture of face-to-face and telephone) where cultural differences dictate a tailored approach. Telephone interviews enable Grant Thornton International to conduct the exact number of recommended interviews and to be certain that the most appropriate individuals are interviewed in an organisation which meets the profile criteria.
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IBR is a survey of medium to large privately held businesses*. The data for this release are drawn from interviews with 2,721 businesses across the globe conducted in August/September 2011.
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Locally, the sample tends to cover the sectors mentioned previously, with some countries being able to have local valid data for specific sectors or regions when the sample size is large enough.
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