SA business optimism dramatically down

Optimism amongst privately held businesses around the world has slumped by 56% in the last 12 months and contributed to the Grant Thornton International optimism/ pessimism barometer recording a negative balance of -16% compared to +40% in 2008. This is the first time pessimists have outweighed optimists about the outlook for their economy. In South Africa only +35% of privately held businesses are optimistic about 2009 (+75% in 2008), with an overwhelming consensus that falling consumer demand and the shortage of business credit are the biggest threats to privately held businesses. South Africa still ranks as the sixth most optimistic country of the 36 surveyed in Grant Thornton’s 2009 International Business Report (IBR), up from ninth position last year.

Now in its seventh year, the IBR survey researches the opinions and expectations of privately held businesses in 36 countries.

Within South Africa, the most optimistic province is Gauteng at +40% and the least optimistic province is the Eastern Cape at +17%.

Leonard Brehm, National Chairman of Grant Thornton says, “Despite the slump in optimism, there are still pockets of hope in the South African marketplace and it is no coincidence that privately held businesses are some of the first to realise this. Their macro view of the global economic situation explains the overall slump in optimism. While privately held businesses worldwide are preparing for a prolonged and painful downturn real opportunities exist, especially in South Africa.’’

Dennis Dykes, Chief Economist of the Nedbank Group, says that the results of the survey are not surprising. “Sentiment around the world has turned overwhelmingly negative as the effects of the financial crisis started becoming apparent. South Africa has been relatively shielded by a healthy banking system as well as the fixed investment boom ahead of the FIFA 2010 World Cup. Additionally, the 2010 event should continue to soften the effects of the global crisis, and lower interest rates and oil prices should help a modest recovery in the second half of the year.”

SA business expectations – the hard facts
IBR investigates key business indicators to better understand optimism and pessimism levels.

All indicators showed a decrease from 2008. Notably, employment expectations decreased by 32%, profitability by 32% and turnover expectations by 18%.

Gauteng reported the highest expectations for increased employment at +21%. However, the Western Cape reported employment expectations of -2%.

Global turnover
Globally, some countries surveyed have high turnover expectations with Vietnam at +91%, India (+71%) and Botswana (+70%). Others fear the worst with Hong Kong at -48%, Taiwan (-44%), Japan (-23%) and Spain (-21%). Not surprisingly, the results show a significant downward trend on last year, even for economies still expecting turnover to rise.

Business expectations for privately held businesses in South Africa

Global optimism
Botswana is the only other sub-Saharan country which participated in IBR 2009. The country’s business optimism soared from +66% in 2008 to +81% in 2009. This ranked Botswana as the second most optimistic country in the survey and the country whose business optimism levels increased the most from 2008.

The most optimistic country in the survey is India at +83% (+95% in 2008). India’s business optimism can be attributed to the robust economic growth of recent years, which the country hopes to maintain throughout 2009.

Global pessimism
Businesses in Japan are the least optimistic. Pessimism levels in the country slumped from -44% in 2008 to -85% in 2009.

The biggest swing in sentiment was in Hong Kong, which went from +81% optimistic last year to -49%, a result of its exposure not only as one of the hard-hit financial services centres but also of its close trading links with both the East and West.

ends

Further enquiries, please contact:
Leonard Brehm, National Chairman, Grant Thornton, +27 11 322 4565, +27 83 655 4565

Media enquiries, please contact:
Sean Naidoo, Marketing/Communications Executive, +27 11 322 4595, +27 73 252 3541

Notes to editors
About IBR
Grant Thornton’s 2009 International Business Report is an annual survey of the views of senior executives in privately held businesses all over the world. The report now surveys over 7000 privately held businesses in 36 economies providing territory, regional and global trend data on the economic and commercial issues affecting a sector often described as the ‘engine’ of the world’s economy. The research is conducted by Experian Business Strategies Ltd. Grant Thornton International will donate US$5 to UNICEF for every completed IBR questionnaire.

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