Crime impact on SA business continues downward trend, but other macro economic factors affecting business

6 July 2011 | Category: Companies Act, International business report, News

While the statistics are still worryingly high, Grant Thornton reveals that the impact of contact crime on South African business continues its decline since this concern was first surveyed in 2007. 

Grant Thornton’’s 2011 International Business Report on business owners’ perceptions, reveals that 50% of South African businesses have been directly affected by contact crime during the past 12 months. 

At a media briefing this morning, national chairman of Grant Thornton SA, Leonard Brehm, said: “This figure is still unacceptably high, with half of the survey population being directly affected by crime in the past year. The sad conclusion is that crime is still a major problem in South Africa.”

South African business owners were asked if they, their employees or any of their immediate families had been directly affected by contact crimes (road rage, hijackings, personal security threat, violent crime or housebreakings) in the past year – 50% said yes.

The good news is that the responses are lower each year.  “When we started surveying the impact of crime on South African private businesses in 2007, an astonishing 84% had been directly affected by crime during the 12 months under review,” says Brehm.  “Now, just five years later, the figures are almost 35% lower.

In terms of business owners considering emigration, the figures also indicate a lower percentage each year.  In 2009, 32% responded they were considering leaving, while 2010’s data reveals 18% and in 2011 17% of South African business owners have seriously considered leaving SA permanently, as a result of the impact of crime.

Business owners’ reasons for considering emigration have changed since 2010.  The high crime rate – still the number one reason causing business owners to consider emigration – was an astonishing 93% in 2009 but has declined year by year and is 56% in 2011. 

Increasingly, the political climate is a reason for business owners to consider emigration with 46% citing this as a concern this year compared to 42% during 2010.  The regional data relating to the political climate as a reason to emigrate reveals further interesting findings.

Gauteng (57%) and the Eastern Cape (62%) recorded the highest responses as to whether the political climate is a concern, with the Western Cape citing the lowest concern for this issue at 29%. Conversely, the Western Cape stated that the high crime rate in South Africa is their main reason for considering emigration (64%), followed by KZN (59%), then Gauteng business owners at 54% and Eastern Cape at 46%.

When South African business owners were asked to describe how the threat to personal security affected business operations, increased costs of security (48%) and decreased motivation (20%) were the two most important items identified.  “This is a clear indication that organisations experience a serious financial impact from crime,” says Brehm. “Overall, though we are encouraged by the fact that that there has been an improving trend over the years but the effect and cost of contact crime on business remains appalling.”

51% of South African business owners state that their businesses have been negatively affected by Government Service Delivery. 

At this morning’s media briefing Grant Thornton released findings relating to South African specific factors affecting business – which will now be tracked on a quarterly basis as part of the International Business Report (IBR). Government Service Delivery is one of the four elements to be tracked for South Africa in the firm’s quarterly IBR tracker.  Other elements being tracked are perceptions relating to South Africa’s socio-political environment, the impact of the Companies Act and crime, which is dealt with above.

“Business owners state that utilities such as gas and electricity are the biggest service delivery element negatively impacting their business (30%) with billing issues (20%) and road concerns such as potholes and traffic lights a secondary concern (20%),” says Brehm. 

Other macro economic factors impacting business in South Africa

IBR Quarterly tracker topic Question asked Q2 – 2011 perceptions
Crime In the past 12 months have you, your staff or family of staff been affected by the threat to personal security? 50% YES (2011)

55% YES (2010)

  In what way has the threat to personal security affected your business? Increased cost of security: 47%

Decreased motivation:20%

Decreased productivity: 18%

Decreased creativity:12%

Loss of staff:10%

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: 30%

Billing issues e.g. rates and taxes: 20%

Roads e.g. potholes and traffic lights: 20%

Other: 30%

Political climate Are you worried about the impact of the political climate in South Africa on your business? Worried: 48%

Not worried: 52%

Companies Act How well informed are you about the new Companies Act? Well informed: 40%

Poorly informed: 35%

When business owners were asked about the political climate and its impact on business decisions, 48% of executives surveyed for this quarter are worried.

Regarding the Companies Act, Brehm says: “When the Act became effective on 1 May, companies were asked to comply with legislation, aspects of which they know very little about.” Grant Thornton’s IBR quarterly tracker reveals that on balance only 5% of businesses are well informed about the new Act.

“We’re encouraged to see, though, that 40% of business owners surveyed are well informed on the new Act, however an alarming 35% of businesses are poorly informed,” he says.

Brehm expects that knowledge of the new Companies Act and all its intricacies could take years for businesses to achieve.

Global tracker elements – Q2 economic update

Global perceptions from over 11 000 business owners will be tracked quarterly.

The Q2 rolling average economic data relating to Grant Thornton International’s Optimism / Pessimism Index, shows that South Africa’s optimism balance of +66% is very similar to the +67% rolling average recorded in Q1. This is against a global optimism balance of just +28%, which seems to be gradually improving from the 27% rolling average in Q1.

An “optimism balance” is the proportion of business owners reporting they are optimistic about the outlook of their country’s economy for the year ahead, less those reporting they are pessimistic.

“Sharp increases in administered prices, the strong rand and uncertainty regarding issues such as nationalisation of mines in South Africa make business conditions tough this year –particularly for those with an export focus,” said Brehm. “It seems South African business owners continue to be optimistic about the nation’s economic landscape for the year ahead.”

When monitoring business constraints on a quarterly basis South African business owners state that the lack of availability of a skilled workforce is still the major constraint to business growth. 

Grant Thornton’s Q2 data reveals that 37% of SA business owners believe that the lack of a skilled workforce is the greatest constraint to business expansion. Over-regulation is increasingly constraining business growth, up 4% since December 2010, and this is ranked by business owners as the second biggest factor at 34%.

The BRIC economies seem to be battling with similar constraint issues with BRIC business owners indicating that the lack of availability of skills (BRIC: 41%) and regulatory issues (BRIC: 36%) combined with the cost of finance (BRIC: 36%) are the major constraints in Brazil, Russia, India and China too.


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