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Aug 27, 2012

SA firms face fewer constraints than Bric counterparts but skills a major concern

Africa|Grant Thornton Johannesburg|India|System|Africa|Brazil|China|Russia|South Africa|Equipment|Finance|Long-term Finance|DAVID CAMPBELL
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While South African businesses face fewer constraints to expansion than their counterparts in other Bric nations (Brazil, Russia, India and China), the country’s “endemic” skills shortage continued to weigh it down, Grant Thornton Johannesburg CEO David Campbell said on Monday.

The latest Grant Thornton 'International Business Report' (IBR) again highlighted the lack of a skilled workforce and overregulation as the two biggest blockages for economic growth.

With 25% unemployment and a modest 3% projection for growth, there is no ambiguity around the severity of our skills shortage. Unless we address how to appropriately up-skill and educate the population, South Africa will not be able to take advantage of the accessibility and affordability of finance to drive long-term growth,” Campbell noted.

Thirty-eight per cent of South African executives said that the skills shortage affected their business (36% Bric), while 37% believe that overregulation and red tape were hindering growth (36% Bric). Both South Africa and the Bric nations are more exposed to these constraints than the rest of the world.

However, South African businesses faced significantly fewer constraints to expansion than companies in other Bric nations, with local executives feeling less constrained by the cost of finance, access to long-term finance and order demand.

The quarterly survey, which looks at the views of senior executives in privately held businesses all over the world, revealed that 35% of Bric businesses experienced shortages in terms of the quantities of orders being placed, while this was only the case for 18% of those surveyed in South Africa.

Thirty-four per cent of Bric respondents also felt constrained by the prohibitive cost of finance, compared with 17% in South Africa and 29% of businesses in the Bric nations cited the shortage of access to long-term finance as a barrier to growth, compared with 13% in South Africa.

Globally, 22% of business executives experienced difficulty in accessing long-term financing and high costs of finance.

“The South African economy has been insulated from much of the global market turbulence owing, in part, to the country’s top-ranked audit and accounting standards, a sound banking system, and well-regulated stock exchange,” said Campbell.

He added that South African businesses should view this local strength as an opportunity to make progress through long-term investments in research and development (R&D) and equipment that would place companies at an advantage once the developed world moves out of the recessionary period.

The IBR research also showed that businesses in the emerging markets were leading the way in investing for long-term growth.

Forty-five per cent of businesses in the Bric countries plan to increase investment in R&D over the next year, compared with just 18% of businesses in the Group of Seven nations (G7).

Similarly, 47% of Bric businesses plan to increase investment in plant and machinery over the next 12 months, compared with 37% in the G7.

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
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