SA business optimism bounces back

21 January 2010

South African companies are hopeful that the worst of the recession is behind them, according to Consultancy firm Grant Thornton’s latest International Business Report, which shows an optimism/pessimism balance of +60% compared to +35% a year ago.

The International Business Report (IBR) survey of over 7 400 privately held busiensses across 36 economies, now in its 8th year, also highlights that South Africa expects the turnaround post-recession to occur a lot earlier than in most other countries.

“SA business owners are certainly looking with renewed optimism towards the coming 2010 Fifa World Cup year and its associated rewards,” Grant Thornton South Africa chairman Leonard Brehm said in a statement this week.

Increased global optimism

Optimism among companies around the world has bounced back to give the Grant Thornton global optimism/pessimism index for 2010 an overall optimism balance of +24%, compared to its lowest ever score of -16% this time last year.

Businesses in Chile, India, Australia, Vietnam and Brazil are the most optimistic, all scoring over +70%. Close behind are South Africa, China, Singapore, Canada and Hong Kong (which showed the biggest swing of sentiment from 2009) at +60% or higher.

Businesses in places as geographically diverse as Australia, New Zealand, Canada, Malaysia and Germany recorded disproportionately higher optimism than might be expected.

“Many governments, on reading these results, will hope their business community is right and that their GDP in 2010 will outstrip IMF forecasts,” said Brehm. “This is especially because privately held businesses contribute 81% of global GDP. The global business community should be encouraged by the results of this survey.”

At the other end of the scale, many Eurozone countries remain pessimistic about the future; Italy, Denmark, Finland and France all scored -10% or lower.

First half upturn

The IBR statistics indicate that 26% of South African privately held business owners expect an upturn during the first half of 2010, with 33% expecting the upturn to take place in the second half of the year – most likely as a direct result of the World Cup event in June/July.

In comparison, global statistics indicate a turnaround during the second half of 2010 (34%) or only during 2011 (23%).

“In addition, the 2010 IBR survey indicates a group of ten economies – which includes South Africa – where businesses are more optimistic about the outlook for their economies than International Monetary Fund (IMF) forecasts might suggest,” says Brehm.

Improving revenues, profits, investment

Why are South African business owners optimistic?

“South African specific data found that expectations of increased revenues in 2010 once again surpassed global trends with +60% optimism balance, compared to the global +40% figure,” says Brehm.

Of all trends highlighted, global privately held businesses expectations of increased revenue came out highest.

Privately held businesses in South Africa also believe that profitability (+44%) and investment in plant and machinery (+37%) will both increase. Global figures for profitability (+29%) and investment in plant and machinery (+31%) also indicated increases.

Businesses were much less hopeful about selling prices with 21 out of 36 economies, including South Africa, less optimistic about increasing their prices than they were in 2009.

“This suggests that during the recession businesses have become leaner and more cost effective which may enable them to lower prices while still securing increased revenues and, crucially, profits,” says Brehm. “As the global economy emerges from recession, we are likely to see many businesses reaping the rewards of recession induced efficiencies.”

Employment optimism

South Africa’s employment optimism data indicates a +25% increase, compared to the global number of +20%. European businesses were far more pessimistic than their counterparts elsewhere in the world; a negative balance of -1% in Europe compared to balances of +33% and +42% in Asia Pacific and Latin America respectively.

All countries which recorded negative balances for employment were European, led by Ireland and Italy (both -14%).

“Many people blamed globalisation for the speed of the downturn but we are now seeing that globalisation may also help us accelerate out of recession. The giant emerging markets of China, India and Brazil are confident that they can help to pull the rest of the world back into growth.

“Businesses in many other economies are equally optimistic that they have not only survived this recession but are well placed to help drive the upturn, and see their business grow as a result,” concludes Brehm.

SAinfo reporter

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