South African business owners remain optimistic about the economy and profitability despite the rand’s strength, a new survey shows.
The first findings of the annual Grant Thornton International Business Owners Survey (IBOS) show a significant swing to optimism about the economy among business owners in 26 countries across the world. Research has been based on an optimism/pessimism balance where the recorded figure represents the percentage balance between respondents who were optimistic and those who were pessimistic.
South African respondents maintained their position as the fourth most optimistic business owners with a score of +72%, which represents a phenomenal increase in optimism from last year’s +34%. The global average is +39%, compared to last year’s +3%.
On balance, 52% of South African business owners expect the profitability of their businesses to improve. This compares with a global average of 42% and a South African average for last year of 47%.
Encouragingly, this optimism is despite the strength of the rand. On balance, 40% (compared to 71% last year) expect increased selling prices and 15% (compared to 36% last year) expect improved exports.
Says Grant Thornton South Africa national chairman Leonard Brehm: “This substantially reflects the impact of the strengthening rand. In the previous year, South Africans led the world in their optimism about these factors. However, it is most encouraging to see that our business owners have overcome the impact of the strength of the currency and still expect improved profit.”
India tops the league table in being the most optimistic country with an optimism/pessimism balance of +83%. Following close behind is Australia (+81%), and the US (+75%). This reflects the spectacular performance of the US economy with annualised 2003 third quarter growth of more than 7% at the time of the survey — the strongest for 20 years.
Although more optimistic than last year, Eurozone countries are much slower in anticipating a recovery. Five out of seven Eurozone countries in the survey are in the ten most pessimistic countries in the world. Germany is the most pessimistic with an optimism/pessimism balance of -6%. Two non- Eurozone countries, the UK and Sweden, are optimistic, with balances of +49% and +24% respectively. The UK and Spain, which also has a balance of +49%, are the most optimistic European countries.
Structural economic problems have kept Japan at the bottom of the table for the second year running with a balance of -46%, although this is significantly more optimistic than last year’s balance of -71%. The picture across Asia, however, is mixed. There has been a dramatic swing to optimism in Hong Kong — from a balance of -30% last year to +51% — perhaps indicating that the economy may be turning the corner. Singapore is the only country in the survey to become more pessimistic this year and, unlike Hong Kong, appears to have been unable to shake off the repercussions of Sars (severe acute respiratory syndrome).
Said Brehm “Overall the results paint a much better economic picture than this time last year with a global optimism balance of +39% compared to +3% twelve months ago. The global economy appears to be firmly on a +recovery path, led by a strong economy in the US. While Europe is also more positive, business owners remain more cautious and lag far behind the US.
“If you are doing business in Asia, the survey strikes a note of caution in certain countries.” – I-Net Bridge