South African executives delaying investment decisions – Grant Thornton

17th May 2016 By: Anine Kilian - Contributing Editor Online

South African executives delaying investment decisions – Grant Thornton

Nearly two-thirds of South African business executives are delaying their investment decisions, while almost half are considering investing offshore, owing to uncertainty regarding the future political direction of the country.

These were the findings of the latest Grant Thornton International Business Report (IBR) for the first quarter of this year.
 
“Following a settling of South Africa’s currency since the national budget Speech by Finance Minister Pravin Gordhan in February, and with Parliament issues gradually stabilising, we hope the political climate will settle during the second quarter of this year,” Grant Thornton Pretoria managing partner Johan Blignaut said in a statement issued on Tuesday.
 
Grant Thornton calculated business optimism by measuring the percentage of respondents who reported a positive outlook and deducting the percentage who reported a negative outlook for the year ahead. 

In the first quarter of this year, there were 41% more negative outlooks expressed than positive outlooks and, for the first time since 2012, global business optimism fell to a three-year low.

“A potent combination of fragile financial markets, volatility in oil prices, concerns over terrorist attacks and regional issues including the prospect of a British exit from the European Union, coupled with the US presidential race, resulted in the majority of regions uncertain in their economic outlooks,” he said.

Blignaut pointed out that, for domestic business executivies, rising energy costs were considered the biggest constraint to growth and expansion.

Fifty-four per cent of businesses stated that economic uncertainty was limiting growth, while 53% cited exchange rate fluctuations as a key constraint. 

Forty-four per cent of local businesses said regulation and red tape was a constraint to business expansion, while a lack of a skilled workforce was constraining 35% of business executives’ growth plans.

“At a time when businesses are so focused on containing excessive costs, rising energy prices are a massive burden and its effect on business growth will definitely be felt,” he noted.
 
Sixty-nine per cent of businesses reported that they had been negatively impacted by poor government service delivery.

The second biggest challenge for organisations in the IBR survey was strikes by government employees, with 65% of respondents lamenting this issue.

“The availability of reliable utilities, such as water and electricity, is crucial to ensuring normal working conditions,” Blignaut pointed out.

During the first quarter of this year, 56% of executives listed road infrastructure as a concern, down from 61% in 2015.

Only 45% of business executives confirmed that billing issues were affecting their businesses, also down from 54% in the first quarter of 2015. 
 
“At present, South Africa’s business landscape is uncertain and our economy is struggling along. A common feature in the stories of the most dynamic and successful firms is that they don’t let the noise from these external factors out of their control distract them from looking at their own operations, and they continue to invest in the pursuit of growth years down the line.

“Without investment now, businesses will find themselves behind the curve when conditions overhead improve,” Blignaut concluded.