Lack of a skilled workforce is SA’s biggest constraint to growth

2010 Grant Thornton IBR survey reveals lack of skills now less of a business restriction than in 2009

28 January 2010

South African business owners have been – for four consecutive years - most concerned about a lack of availability of a skilled workforce and rate this factor as their major constraint (34%) to business growth.

That’s according to Grant Thornton’s 2010 International Business Report’s (IBR) findings, relating key constraints on ability to expand the business.

The IBR is an international survey of over 7400 CEOs and other senior executives focusing on opinions of medium to large privately held businesses (PHBs).

This figure, however, is lower than 2009’s 41% which indicates a clear improvement in South African privately held business owners’ perception of the nation’s workforce and regarding the availability of skills.

By contrast, globally, a shortage of orders and reduced demand for products has yet again proven to be the major constraint (39%). This is less of an issue than in 2005 when 49% of business owners globally rated this as the most important issue.

Leonard Brehm, National Chairman of Grant Thornton South Africa says, “South African PHBs are feeling a little less constrained by a lack of skilled workforce, but this is probably due to the recession causing a slightly reduced demand for skills. By contrast, global PHBs see this as a much less important issue.”

Yet, South Africa concurs with the global trend that overregulation and red tape is the second biggest restrictor to business expansion (all at 32%). Worldwide, concern about regulations and red tape increased by 2% compared to 2009’s findings (30%).

Overall, the IBR 2010 data for business constraints indicates that globally businesses are more optimistic with the majority of countries less concerned about constraints affecting business expansion. “This improvement is a clear sign of an upturn,” says Brehm. “With worldwide businesses feeling less constrained than 12 months ago by a variety of factors, PHB owners’ focus for the year ahead will shift to long term growth and stability.”

Thailand and Russia were the only countries that are more pessimistic this year, than they were in 2009, considering all constraints.

Brehm warns, however that, business owners need to be cautious. “An upturn in the economy is a danger period for PHB owners, with the requirement for additional working capital sure to impact organisations in terms of cash flow,” adds Brehm. “Recessions naturally release cash flow because everyone reduces inventories. Once the economy turns and demand increases, this process reverses and businesses can be caught short. Now, more than ever, is the time to be careful with cash.”

ends

For further information contact
Leonard Brehm
National Chairman, Grant Thornton SA
+27 (0)11 322 4500

Sean Naidoo
Marketing/Communications Executive
+27 (0)11 322 4595 / snaidoo2@gt.co.za

Follow @grantthornton on Twitter: http://www.twitter.com/grantthornton

Notes to editors
Grant Thornton International is one of the world’s leading organisations of independently owned and managed accounting and consulting firms. These firms provide assurance, tax and specialist business advice to privately held businesses and public interest entities. Services are delivered independently by the member and correspondent firms within Grant Thornton International, a non-practicing, international umbrella entity organised as a private company limited by guarantee incorporated in England and Wales.

Grant Thornton International does not deliver services in its own name or otherwise. Grant Thornton International and the member firms are not a worldwide partnership. Grant Thornton South Africa is a member firm of Grant Thornton International Ltd. Any and all references to Grant Thornton International are to Grant Thornton International Ltd.

What is the IBR report regarding constraints?
The IBR report regarding constraints required that business owners rate a variety of factors according to how they impacted PHBs ability to expand the business. Factors highlighted, were: Cost of finance (SA 20%; Global 28%); Shortage of working capital (SA 18%; Global 26%); Shortage of long term finance (SA 17%; Global 25%); Regulations / red tape (SA 32%; Global 32%); Lack of availability of a skilled workforce (SA 34%; Global 21%); Shortage of orders / reduced demand (SA 26%; Global 39%).

What are key global findings from the study?

• When asked about business constraints, most businesses globally think that shortage of orders / reduced demand is their major constraint (39%, followed by regulations and red tape (32%)
• The figures suggest that the worst of the downturn is over as businesses are more positive about constraints – regulations / red tape is the only issue that is more of a concern in 2010 than in 2009
• On a country level, Thailand and Russia are the only countries that are now more pessimistic than in 2009, considering all constraints
• A lack of a skilled workforce is now global businesses’ least important constraint (21%)
• Latin America is the region least concerned about shortage of orders / reduced demand with only 20% of businesses selecting this option

What is the International Business Report?
The Grant Thornton International Business Report (IBR) is an international survey of the opinions of medium to large privately held businesses. The survey covers over 7,400 respondents in 36 economies.

What is the balance percentage?
A balance statistic reports the percentage of respondents who reported a figure rising less than the percentage who reported it falling. It not only provides a useful summary statistic, but numerous studies have shown it is well correlated with economic time series data and that it performs as well as highly complex methods of analysing survey data to predicting economic outcomes.

What is a PHB?
A privately held business includes businesses such as entrepreneurs, family businesses and non-listed entities which account for over 98% of businesses worldwide.

How is the data collected?
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), China and India (mixture of face-to-face and telephone), where cultural differences dictate a tailored approach.

Who do we survey?
IBR is conducted among medium to large privately held businesses, surveying over 7,400 chief executive officers, managing directors, chairmen or other senior executives from 36 economies primarily across ten industry sectors (cleantech, food & beverage, construction & real estate, hospitality, transport, manufacturing, retail, financial services, healthcare and technology).

When was fieldwork conducted?
October/November 2009.