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SA business optimism ranks low globally - study

Johannesburg – Two-thirds or 65.8% of South African business executives say that their decisions have been impacted by the uncertainty of the country’s financial state as well as the turbulent economic environment.

This is according to Grant Thornton’s International Business Report, for the fourth quarter of 2016. The report provides global insights from a survey of over 2600 chief executive officers, managing directors, chairpersons or other senior executives per quarter. The findings come from business executive interviews held between October and December 2016.

In total 100 business executives were interviewed in South Africa for the latest report.

Locally 58% of executives said that they were delaying expansion plans over economic uncertainty, explained Gillian Saunders, head of advisory services at Grant Thornton SA.

Further, less than half (47.5%) said they were delaying investment decisions. Almost a third (29.8%) of the executives were considering offshore investments, in more stable business environments. And 23% were considering selling their businesses.

“It’s concerning that such a huge proportion of our country’s corporate world is directly impacted by this instability,” said Saunders. “Delayed business decisions, stalling company growth and considerations to invest offshore will dampen our GDP growth even more,” she added.

Poor government service delivery and regulatory requirements impacted 62% of executives’ businesses. Only 9% of those surveyed said their businesses were positively affected.

“Service delivery should be fully-functioning across all major city nodes, all the time. It is disappointing when government’s delivery of basic needs and infrastructure impacts the functionality of a business,” added Saunders. 

About 57% of executives said they were impacted by increased service costs and 53% said they were impacted by disrupted supply utilities. Just under half (49%) said red tape and legislative compliance impacted their business.   

SA optimism underwhelming

South Africa’s optimism for future prospects was much lower than the global perspective. Globally, business optimism at the end of the fourth quarter of 2016 stood at a net of 38%, up five percentage points from the third quarter.

However South Africa’s optimism levels remain “stagnant”. At the end of December 2016, South African businesses were only 6% optimistic, this is four percentage points down from levels recorded in the third quarter.

But Saunders said overall this was an improvement in optimism levels from the first quarter of 2016, which was -41%. This is a 48 percentage improvement, which Saunders said is promising.

READ: Signs of business confidence stabilising - index

“Starting 2017 off with more optimism than last year overall, is a positive sign. South Africa has good economic growth potential in 2017,” said Saunders. This is mostly because the drought is over which could see an improvement in agricultural returns. There’s also been an uptick in global commodity process, electricity supply is stabilising and the rand is at “reasonable values” said Saunders.

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