Skills shortage SA’s ‘biggest constraint’

19 February 2009

Forty-one percent of South Africa’s privately held business cite the availability of a skilled workforce as the biggest constraint to business growth, according to consultancy firm Grant Thornton’s 2009 International Business Report.

This is the third consecutive year that workforce issues have been cited in Grant Thornton’s survey as the greatest impediment to growth in South Africa, though the figure is down from 48% in the 2008 survey.

The survey finds that businesses in Botswana (54%) and Australia (47%) also identify this as their greatest business constraint.

“Reduction in demand is hurting businesses, but the shortage of skills remains the single most important constraint on business growth in South Africa,” Grant Thornton SA chairman Leonard Brehm said in a statement this week.

“It is clear that the impact of falling demand is being felt around the world.”

He added that privately held businesses in every market needed to be proactive, take time to understand the specific issues affecting their business, and develop strategies that allowed them to respond quickly to changes in the marketplace.

Red tape

A third of businesses in South Africa also cited regulations as their biggest constraint.

When asked about the area of regulation that has the biggest impact on their ability to grow, employment laws were ranked number one at 28% (29% in 2008) – considerably higher than any other kind of regulation.

“More surprising, in the current economic climate, is that red tape continues to outrank cost of finance (29%) as a constraint to growth in South Africa,” the survey noted.

Shortage of long-term finance is seen as a major issue in South Africa by only 17% of businesses compared to 27% globally. Globally, businesses in Mexico (66%) and Poland (45%) rank regulations as their biggest constraint to growth.

Reduction in demand

The International Business Report finds that 49% of privately held businesses around the world identified a shortage of orders as their biggest barrier to expansion, a rise from 31% in 2008.

A shortage of orders was the second-biggest constraint in South Africa, with the number of business surveyed being concerned by the issue rising from 20% in 2008 to 34% in the current survey.

Globally, the countries most concerned about reduced demand were Japan (78%), Italy (70%) and Vietnam (64%). Economies less concerned about the shortage of orders include Thailand, the Netherlands and India.

Macquarie First South macro strategy head Nazmeera Moola said that the collapse in demand that began in the third quarter of last year was going to be the main focus for most governments and corporations around the world.

She said that while South African authorities could offer fiscal stimulus and interest rate cuts to moderate the effect in the short term, the survey highlighted the importance of looking at the long-term constraints companies faced as well.

“Lack of skills and onerous regulatory burden are two constraints that [the] government can do a great deal to mitigate,” Moola said. “More focus is needed on these areas in 2009, to ensure that long-term growth potential remains strong.”

SAinfo reporter

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