Q1 Grant Thornton International Business Report Tracker for 2012 reveals impact of crime, service delivery, and political climate on SA business owners
Grant Thornton’s latest quarterly survey on privately held business owner’s perceptions highlights that utilities such as gas and electricity, is having the greatest negative impact on businesses in terms of government service delivery. The survey also reveals that poor government services relating to billing issues (rates and taxes) and roads concerns (potholes and traffic lights) are adding undue pressures to businesses.
The Grant Thornton International Business Report (IBR) provides quarterly tracker insights into the views and expectations of over 11,500 businesses surveyed in total per year across 40 economies. The Q1 data for IBR 2012 also highlights regional and national business owner perceptions regarding crime, service delivery and political climate for SA business owners.
“Poor government service delivery and uncertainty regarding the political direction has been high on the agenda for South African business owners in every quarterly survey we’ve ever conducted,” says Deepak Nagar, the national chairman for Grant Thornton South Africa. “It’s concerning that the nation’s government doesn’t add valuable input into the success of business, and instead causes undue pressures to business operations.”
Figure 1: Greatest negative impact on business in terms of government service delivery
The Q1 Tracker for 2012 highlights that the entire nation is battling with poor service delivery of utilities such as gas and electricity, but it also indicates that businesses in the Western Cape are most affected by billing concerns (Western Cape: 19%; Gauteng: 17%; Eastern Cape 14% and KZN 10%). Conversely, KZN and Gauteng seem to struggle with road issues, particularly potholes and traffic lights negatively impacting business performance (KZN: 21%; Gauteng: 18%; Eastern Cape: 15% and Western Cape: 10%).
In addition to poor Government service delivery issues, businesses have consciously admitted that political uncertainty is causing executives to delay the making of important business decisions. The Q1 2012 Tracker records that 28% of South African executives are putting off making important investment decisions because of political uncertainty across the country (2011: 24%) and 24% of business owners have admitted they’d rather invest offshore than in South Africa (2011: 24%).
Figure 2: Impact on business decisions regarding uncertainty of the future political direction of the country
“It is encouraging that the data highlights fewer business owners stating political uncertainty as a concern causing them to consider selling their business, compared to responses recorded in 2011,” says Nagar (SA 2011: 17% vs SA 2012: 15%). “Our economy does need to provide a more stable investment environment though, to encourage more businesses to speed up investment decisions and to start investing domestically again.”
As in Q4 2011, Grant Thornton’s latest quarterly survey on privately held business owners’ perceptions highlights that 37% of South African executives rate over-regulation and red tape as the biggest constraint to business expansion.
This is the second time in six years that over-regulation as a business constraint surpasses SA business owner frustrations relating to the lack of availability of a skilled workforce with 35% (Q4 2011: 36%) of business owners noting this as a challenge.
“It’s clear that the plethora of regulation and red tape in SA as well as a poorly skilled workforce are continually ranked high by business owners in terms of constraints to expanding business operations,” continues Nagar. “The problem persists on impeding business growth and the matter needs to be addressed as a matter of urgency.”
Business owner perceptions in South Africa, compared to the issues raised by BRIC countries differ slightly by order of importance, with the following rankings of business constraints recorded in Q1 2012 for BRIC economies:
1. A lack of availability of a skilled workforce (BRIC: 36% )
2. Regulations/ Red tape (BRIC: 35%)
3. Shortage of orders/ Reduced demand AND Cost of Finance (BRIC: both 32%)
4. Shortage of working capital AND Shortage of long term finance (BRIC: both 29%)
5. Transport infrastructure (BRIC: 21%)
6. ICT infrastructure (BRIC: 19%)
Crime and emigration
When business owners were asked if they or any of their staff and immediate families had been directly affected by a threat to personal security (incl. road rage, hijackings, housebreakings and violent contact crime) in the past 12 months, the Q1 2012 data reveals that this figure continues its downward trend, which is encouraging. The first quarter data for 2012 indicates that 45% of respondents confirmed they had been affected by crime (2011: 46%).
Nagar states that the national data for Q1 2012 is almost 40% lower than what was recorded in the first survey taken in 2007 (84%). “While it is certainly pleasing to see this figure declining steadily over six years, 45% is still surprisingly high and we have a long way to go to see crime being properly eradicated from our daily lives,” he says.
When asked in what ways crime had financially impacted business, the increased cost of security is a South African executive’s greatest expense, with 51% affirming this.
“One wonders if the effect of crime on business is declining as a direct result of SA businesses’ continued and significant investment in personal security systems, armed response and perimeter guarding systems,” says Nagar.
Other financial impacts that crime has on business include a decline in staff motivation (19%), productivity (12%) and creativity (17%), a loss of staff (11%) and even a loss of customers (12%).
Figure 3: Regional breakdown – In what way has the threat to personal security affected your business?
When asked whether business owners had considered emigrating from South Africa, Q1 2012 reveals that 20% have indicated that they have given serious consideration to leaving South Africa permanently. This is figure is unchanged from 2011, and it is marginally up from 18% in 2010 but significantly down from 30% recorded in 2009.
However, the reasons cited by respondents considering emigration are concerning – see figure 4 for details.
“The data affirms our other IBR results in that crime, political uncertainty and government service concerns are the greatest impacts affecting South African private business owners,” adds Nagar. “These same factors are prompting emigration considerations.” Nagar notes that all factors are ranked higher by business owners for Q1 2012, compared to 2011 with poor quality of healthcare (2011: 22%; 2012: 34%) and education (2011: 27%; 2012: 38%) growing as a concern prompting business owners to consider emigrating.
Global tracker elements – Q4 economic update
Global perceptions from over 11 500 business owners in 40 economies are tracked quarterly.
The Q1 rolling average economic data relating to Grant Thornton International’s Optimism / Pessimism Index, shows that South Africa’s optimism balance for the first quarter of 2012 is +54% compared to +58% in 2011 and +60% recorded for the same period in 2010. This is against a global optimism balance of just +14% (2011: +16%) and BRIC optimism of +36% (2011: +40%).
An “optimism balance” is the proportion of business owners reporting they are optimistic less those reporting they are pessimistic.
“It is clear that the world has been hit hard by the economic crisis and subsequent credit crashes of prior years, with all economies recording a continued decline in optimism balances for three successive years,” continues Nagar. “But business owners in South Africa seem, on the whole, to be extremely optimistic about the economic conditions for the year ahead, especially compared to their global counterparts.”
Macro economic factors impacting business in South Africa
|IBR Quarterly tracker topic||Question asked||Q1 – 2012 rolling average perceptions|
|Crime||In the past 12 months have you, your staff or family of staff been affected by the threat to personal security?||Yes – 45%|
|In what way has the threat to personal security affected your business?||Increased cost of security: 51%
Decreased motivation: 19%
Decreased creativity: 17%
Decreased productivity: 12%
Loss of customers: 12%
Loss of staff: 11%
|Government service delivery||Has your business been negatively affected by poor government service delivery?||Yes – 53%
No – 47%
|What is the greatest negative impact on your business of government service delivery?||Utilities – i.e. gas, electricity, water – 41%
Billing issues e.g. rates and taxes – 14%
Roads e.g. potholes and traffic lights – 14%
Other – 23%
|Political climate||Is uncertainty about the future political direction of the country impacting your business decisions?||Yes – 23%
No – 71%
|In what ways has uncertainty about the future political direction of the country impacted your business decisions?||Putting off investment decisions – 28%
Considering investing in off shore rather than in South Africa – 24%
Improving BEE status – 16%
Considering selling the business – 15%
Seriously considering emigration – 5%
Notes to editors
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of over 11,500 businesses per year across 40 economies. This unique survey draws upon 20 years of trend data for most European participants and nine years for many non-European economies. For more information, please visit: www.internationalbusinessreport.com.
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), mainland China and India (mixture of face-to-face and telephone) where cultural differences dictate a tailored approach. Telephone interviews enable Grant Thornton International to conduct the exact number of recommended interviews and to be certain that the most appropriate individuals are interviewed in an organisation which meets the profile criteria.
Data collection is managed by Grant Thornton International’s core research partner – Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire.
IBR is a survey of dynamic organisations (both listed and privately held businesses). The data for this release are drawn from interviews with 3,000 businesses globally conducted in January and February 2012.
The target respondents are chief executive officers, managing directors, chairmen or other senior executives (title dependent on what is most appropriate for the individual country) from 40 economies primarily across five sectors: manufacturing (25 per cent), services (25 per cent), retail (15 per cent) and construction (10 per cent) with the remaining 25 per cent spread across all sectors.
Locally, 150 interviews are conducted per quarter, and 600 interviews per annum. The South African sample tends to cover the sectors mentioned previously.
Notes to editors
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