16 January 2009
Only 35% of privately held businesses in South Africa are optimistic about prospects for the economy in 2009, a drop from 75% in 2008, with an overwhelming consensus that falling consumer demand and the shortage of business credit are the biggest obstacles.
Despite this, South Africa still ranks as the sixth most optimistic country out of the 36 surveyed in accounting and consulting firm Grant Thornton’s 2009 International Business Report (IBR), up from ninth last year.
“Despite the slump in optimism, there are still pockets of hope in the South African marketplace, and it is no coincidence that privately held businesses are some of the first to realise this,” Grant Thornton national chairman Leonard Brehm said in a statement this week.
“Their macro view of the global economic situation explains the overall slump in optimism – while privately held businesses worldwide are preparing for a prolonged and painful downturn, real opportunities exist, especially in South Africa.”
According to the firm, this is the first time that pessimists have outweighed optimists about the outlook for the economy – with the most optimistic province being Gauteng, at 40%, and the least optimistic being the Eastern Cape, at 17%.
The drop follows a global trend, in which business optimism around the world has slumped by 56% in the last 12 months, contributing to the firm’s International optimism/pessimism barometer recording a negative balance of -16%, compared to 40% in 2008.
Nedbank chief economist Dennis Dykes pointed out that the results of the IBR where not surprising, given that sentiment around the world had turned overwhelmingly negative as the effects of the financial crisis started becoming apparent.
“South Africa has been relatively shielded by a healthy banking system as well as the fixed investment boom ahead of the 2010 Fifa World Cup,” he said, explaining that the tournament would help soften the effects of the global crisis locally, while lower interest rates and oil prices should also help a modest recovery in the second half of the year.
SA business expectations
The IBR investigates key business indicators to better understand optimism and pessimism levels. All indicators showed a decrease from 2008, with employment expectations decreasing by 32%, profitability expectations by 32% and turnover expectations by 18%.
Gauteng reported the highest expectations for increased employment at +21%. However, the Western Cape reported employment expectations of -2%.
Globally, some countries surveyed have high turnover expectations, with Vietnam at +91%, India at +71% and Botswana at +70%. Others fear the worst: Hong Kong registered -48%, Taiwan -44%, Japan -23%, and Spain -21%.
“Not surprisingly, the results show a significant downward trend on last year, even for economies still expecting turnover to rise,” Grant Thornton said.
Botswana is the only other sub-Saharan country which participated in IBR 2009, with the country’s business optimism soaring from +66% in 2008 to +81% in 2009, ranking it as the second most optimistic country in the survey and the country whose business optimism levels increased the most from 2008.
The most optimistic country in the survey is India at +83% (+95% in 2008), which can be attributed to the robust economic growth of recent years, which the country hopes to maintain throughout 2009.
Businesses in Japan are the least optimistic, with pessimism levels in the country slumping from -44% in 2008 to -85% in 2009.
The biggest swing in sentiment was in Hong Kong, which went from +81% optimism last year to -49%, “as a result of its exposure not only as one of the hard-hit financial services centres, but also because of its close trading links with both the East and West”.
Now in its seventh year, the IBR survey researches the opinions and expectations of privately held businesses in 36 countries.
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