South African business owners are highly optimistic about growth prospects despite myriad challenges in the local business environment, according to a recent survey published by auditing, accounting and business advisory group Grant Thornton Kessel Feinstein.
More than 80% of the country’s business owners believe that turnover for their businesses will increase substantially in the coming year.
This was the case when Grant Thornton initially conducted its International Business Owners’ survey (Ibos) between September and November last year and, despite the on-going changes in the economic environment, proved to still be the case when the survey was extended to the present.
The survey covered 6 058-business owners across 19 countries, but the local segment included 250 business owners. Grant Thornton Kessel Feinstein will also be launching its Ibos website where business owners can benchmark their opinions against their peers in South Africa, 18 other countries or globally.
Leonard Brehm, national chairperson of Grant Thornton, says that local firms expect employment to rise in the next 12 months as a result of improved business activity.
According to the survey, 58% of South African companies experienced an increase in employment last year, the highest in the world, with a mere 9% recording declines in head count.
Richard Buchholz, managing director of Nedbank’s Corporate Business Banking division, says he believes that the country will experience an improvement in employment following the expected decline in interest rates during the second half of the year.
He believes that outlook for inflation looks encouraging, given a stronger rand, softer food prices and a subdued global economy.
Added to these positives, Statistics South Africa recently announced significant revisions to the consumer inflation figures going back to February 2002. The revisions followed the discovery of the incorrect use of outdated data for the calculation of the rental component of the housing index, which ultimately overstated CPIX inflation by nearly 2 percentage points. The dramatic downward revision will create scope for around three interest rates cuts of approximately 100 basis points each in the second half of the year.
Buchholz says Nedbank is optimistic that the economy will rebound in the next 12 months. Lower inflation and falling interest rates should help to boost both business and consumer confidence, while expansionary fiscal policy will provide added support for the economy going into next year.
“Organic growth is likely to be the main source of growth for local businesses,” adds Brehm.
While the outlook for local businesses looks rosy, as borrowing rates look set to come down, Brehm says local managers are concerned about the impact HIV/Aids and Black Economic Empowerment (BEE) might have on their businesses.
“SA Incorporated is already feeling the heat as more people are taking sick leave because of Aids related illness,” adds Brehm. According to the survey, 78% of respondents said that HIV/Aids will impact negatively on their bottom line. Furthermore, the survey indicates that only 50% of South African business owners regard Black Economic Empowerment as an important issue in running their businesses.
A recent Investor Relations conference held in Johannesburg came out in support of the survey findings, suggesting that investors are struggling to get to grips with BEE, HIV-Aids and corporate governance.
Brehm urged companies to consider HIV/Aids in their enterprise wide risk assessments. At present, about 85% of companies surveyed revealed that they had not even commissioned an HIV risk profile.
Interestingly, the survey shows that the rest of the world does not share in our optimism about the future. “There is a significant concern among business owners across the world and particularly pessimism in G8 countries.”
Brehm says the muted expectations of many international business owners come as no surprise in view of the difficult global economic backdrop. – I-Net Bridge