SA businesses ‘face fewer constraints’

28 August 2012

South African businesses face significantly fewer constraints to expansion than their BRIC (Brazil, Russia, India and China) counterparts, according to consultancy Grant Thornton’s latest International Business Report.

“The survey revealed that while 35% of BRIC businesses experienced shortages in terms of the quantities of orders being placed, this was only the case for 18% of those surveyed in South Africa,” Grant Thornton said in a statement on Monday.

The report also found that 34% of BRIC respondents felt constrained by the prohibitive cost of finance, compared to 17% in South Africa, while 29% of businesses in BRIC countries cited the shortage of access to long-term finance as a barrier to growth compared to 13% in South Africa.

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

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

Campbell said South African companies 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 them at an advantage once the developed world moved out of the current recessionary period.

According to Grant Thornton’s research, businesses in the emerging markets lead the way in investing for long-term growth, with 45% of businesses in the BRIC countries planning to increase R&D investment over the next year compared to just 18% of businesses in the G7, and 47% of BRIC businesses planning to increase investment in plant and machinery over the next 12 months, compared to 37% in the G7.

Skills shortage ‘must be addressed’

Campbell said that, regardless of this opportunity, South Africa’s growth would continue to lag behind its fellow BRIC nations unless the country’s endemic skills shortage was properly addressed.

Despite South Africa’s relative advantage in some areas, the Grant Thornton survey again identified the lack of a skilled workforce, and overregulation and red tape, as the two biggest blockages for economic growth in the second quarter of 2012.

According to the report, 38% of South African executives said that the skills shortage affected their business, while 37% believed that overregulation and red tape were hindering growth, compared to 36% on both counts for the other BRIC nations.

The survey revealed that both South Africa and the other BRIC nations were more exposed to these constraints than the rest of the world, with the global average standing at 27%.

“With 25% unemployment and a modest 3% projection for growth, there is no ambiguity around the severity of our skills shortage,” Campbell said.

“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.”

Grant Thornton’s International Business Report, a quarterly survey of the views of senior executives in privately held businesses all over the world, surveys over 12 000 listed and privately held businesses in 40 economies each year.

SAinfo reporter