Johannesburg - The challenges South Africa faces as a country are top of mind for senior executives, according to research by Deloitte of the top 100 companies listed on the Johannesburg Stock Exchange (JSE).
The research piece is titled “Dissecting Disclosures” and used disclosures in annual reports and integrated reports to understand the profile, concerns and strategic focus areas of these listed companies.
Regulatory uncertainty is a significant concern in several industries, including the resources sector, financial services (banking and insurance), healthcare, industrial goods and services, and food and beverages.
This correlates with the World Economic Forum’s (WEF) competitiveness survey in which South Africa was ranked 120th out of 144 countries for the perceived heavy burden of legislation.
READ: SA slips on global competitiveness index
“Resources, financial services and healthcare companies face significant threats arising from changing legislation and political policy, and all identify these as significant threats in their top risks," said John Kruger, senior audit manager of Deloitte.
"The uncertainty around these changes makes South Africa less competitive in a world in which many developed economies are focused on reducing red tape to improve their own competitiveness.”
South Africa’s social and labour stability issues were identified by several companies, who highlighted social unrest and labour unrest as key risks.
In addition, several companies identified concerns around the security of the supply of electricity and water – again highlighting the structural challenges that the South African government has and the resultant burden on doing business.
READ: SA economy will not recover - economist
Annual reports of the JSE top 100 are 61% longer than their UK counterparts on the FTSE 100.
"This we attribute to South Africa’s take-up of integrated reporting, ahead of the UK and the fact that several companies combine their integrated reporting with their full annual financial statements," explained Kruger.
"Globally, governments are focusing on reducing red tape to remain competitive. South Africa’s government has committed to reducing red tape for business, but it is difficult to see the effect when so many corporates on the JSE have indicated legislative and regulatory change as a major risk."
Outgoing governor of the SA Reserve Bank (Sarb) Gill Marcus noted last year that South Africa’s growth could be strengthened if the country became more closely entwined with Africa’s growth trajectory.
"This can only be achieved with increased exposure to the rest of our continent and it is comforting to see the focus in strategy, but disappointing to see the actual exposure," said Kruger.
“With South Africa’s economic growth forecast at 2% for 2014, according to the World Bank, the move into Africa in pursuit of higher growth, while challenged at home by regulation and various external risks, appears to be a theme on the JSE."
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- Fin24