South African businesses are largely pessimistic about the outlook of the domestic economy over the coming 12 months, Grant Thornton’s latest International Business Report (IBR) reveals.

“Sadly, South Africa is stuck in a time of uncertainty, a struggling economy with a pessimistic outlook for the year ahead,” said Grant Thornton South Africa chairperson Deepak Nagar.
 
While local business executives were 16% more optimistic about prospects in the fourth quarter of 2015 than they were during the third quarter, business optimism stood at -24%.
 
“A multitude of macro- and microeconomic factors are directly affecting business executives’ sentiment about the nation. These issues range from geopolitical instability and the economic volatility of China, to South Africa’s own labour concerns, energy issues, the disastrous collapse of the rand and a dramatic decline in confidence in the leadership of the country as a whole,” noted Nagar.

Fifty-nine per cent of South African business executives stated that rising energy costs were the greatest constraint to growing their organisations, while 55% expressed concern regarding economic uncertainty and 51% stated exchange rate fluctuations as a key constraint. 

Further, 45% of South African businesses cited overregulation and red tape as the fourth-greatest constraint to business expansion, while an insufficiently skilled workforce was constraining 22% of business executives’ growth plans.

Seventy-three per cent of business executives indicated that their companies had been negatively impacted by poor government service delivery and 90% cited utilities as the key government service delivery issue affecting their businesses.

Executives also cited strikes by government employees as a significant challenge, with 71% of respondents lamenting this issue.
 
“Municipal workers and other major unions embarked on large-scale strikes during the last quarter of 2015. There is no doubt that these protests affected normal business functions last year,” said Nagar. 

Meanwhile, 59% of South African respondents said they, their staff or family of staff, had been affected by the threat to personal security such as house-breaking, hijacking, violent crime or road rage.
 
This figure was down from 63.5% recorded in the fourth quarter of 2014.

GLOBAL PICTURE
Business optimism globally stood at 36%, down marginally from the third quarter and just above the 35% recorded in the fourth quarter of 2014.

For the first time since the financial crisis, the European Union (EU) was providing the bedrock of stability. For the fourth quarter, 38% of EU businesses were optimistic about their economy over the next 12 months.

This was despite risks posed by the migrant crisis, terrorism and a possible referendum on the UK’s EU membership.

Meanwhile, optimism among US businesses fell from 74% to 50% in the fourth quarter, the biggest fall of any of the 36 countries surveyed for the IBR.