More than half of Western Cape private business owners satisfied with Government service delivery

By: Grant Thornton South Africa  12-08-2011

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 Thornton’s 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 province’s 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 2011’s 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.

Political direction
Despite the country’s 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%
Decreased creativity:12%
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%
Other: 27%
Political climate Is uncertainty about the future political direction of the country impacting your business decisions? Yes: 29%
No: 68%
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 International’s Optimism / Pessimism Index, shows that South Africa’s 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 they’re 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
Neil Miller
Joint Managing Partner
Grant Thornton Cape
T +27 21 417 8800

Nico Olwagen
National Marketing Manager
Grant Thornton South Africa
T +27 (0)11 322 4593 | M +27 (0)82 492 4281

Data collection
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.

Data collection is managed by Grant Thornton International's core research partner - Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. From 2011, fieldwork takes place on a quarterly basis every quarter with fieldwork lasting approximately one month and a half.
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.

The target respondents are chief executive officers, managing directors, chairmen or other senior executives (title dependent on what is most appropriate for the individual country) from 39 economies primarily across five sectors: manufacturing (25 per cent), services (25 per cent), retail (15 per cent) and construction (10 per cent) with the remaining 25 per cent spread across all sectors.

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.

About Grant Thornton South Africa
Grant Thornton South Africa is a member firm of Grant Thornton International Ltd (Grant Thornton International).  The firm has been operating since 1920 and provides a comprehensive range of services, including assurance, tax and specialist business advice to dynamic organisations – listed companies, large privately held businesses and private equity backed organisations.

We employ 900 people in South Africa with 79 partners and directors.  Grant Thornton has a national presence with offices in the major commercial centres being Cape Town, Durban, East London, Johannesburg, Nelspruit, Port Elizabeth and Pretoria.  South Africa is also a major force in the sub-Saharan Africa network, with member firms in Botswana, Guinea, Kenya, Mauritius, Mozambique, Namibia, Uganda, Zambia and Zimbabwe.

About Grant Thornton International Ltd
Grant Thornton International is one of the world's leading organisations of independently owned and managed accounting and consulting firms. The strength of each local firm is reflected in the quality of our organisation. Grant Thornton International member firms share a commitment to providing the same high quality service to their clients wherever they choose to do business.

Grant Thornton International does not deliver services in its own name. Each member and correspondent firm in Grant Thornton International is a separate independent national firm. These firms are not members of one international partnership or otherwise legal partners with each other, nor is any one firm responsible for the services or activities of any other. Each firm governs itself and handles its administrative matters on a local basis.

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