2011: SA companies ‘far more optimistic’

20 January 2011

While South African businesses are expecting a comedown after a buoyant 2010 boosted by the hosting of the Fifa World Cup, local business owners remain far more optimistic than their international counterparts, according to consultancy Grant Thornton’s 2011 International Business Report.

The International Business Report’s (IBR’s) 2011 optimism/pessimism index reveals an optimism balance by SA business owners of +64%, which is up four percent on last year’s index. This is against a global optimism balance of +23% for 2011, compared to +24% for 2010.

The “optimism balance” is the proportion of business owners in South Africa reporting that they are optimistic, less those reporting that they are pessimistic.

“While the strong rand will no doubt make business conditions tough for some this year – particularly those with an export focus – it seems South African business owners continue to be optimistic about the nation’s economic landscape for the year ahead,” Grant Thornton South Africa chairman Leonard Brehm said in a statement this week.

South African business owners – while optimistic overall for business sentiment – were less hopeful for investment in buildings in the year ahead. “The construction sector also experienced significant retrenchments over the past two years,” said Brehm.

The IBR survey, which is now undertaken on a quarterly basis, focuses on mid-cap listed and medium- to large privately held businesses. The optimism/pessimism survey is in its ninth year of research in South Africa.

Growth in turnover expected

Western Cape business owners are the most optimistic with a +72% balance, while Eastern Cape recorded the lowest optimism balance of +52%. KwaZulu-Natal recorded an optimism balance of +69% and Gauteng province +62%.

SA business owners are expecting continued growth in turnover in 2011, with a +65% optimism balance (up from +62% in 2010) compared to the global mean of +56% (up from +40% in 2010).

“South African organisations share positive sentiment for both improved turnover and a growth in profits for 2011,” said Brehm, adding that report data for profits in 2011 were +57%, up from +44% in 2010.

Another positive trend expected in South Africa during 2011 is a significant increase in selling prices, with SA business owners recording +56% optimism balance for the year ahead (up from +46% in 2010). The global optimism balance for selling prices in 2011 is +28%, up from +11% in 2010.

“Considering the current strength of the rand and low inflation, this optimism seems unusual,” said Brehm.

Building investors less optimistic

SA business owners were less hopeful about investments in buildings for 2011. This trend recorded a decline since 2010 with investment in buildings at +17% for 2011 – a drop from +25% in 2010.

“The decline for investment in buildings could indicate tough times ahead for the construction industry,” Brehm said. “No doubt the World Cup infrastructure and construction boom experienced during 2009 and 2010 may also have something to do with the pessimistic outlook in terms of construction projects for 2011.”

Expectations for investment in new staff for 2011 highlighted very different degrees of optimism on a regional level. South Africa’s overall +30% optimism balance features a very optimistic Western Cape with +42%, while the Eastern Cape region is far less optimistic about employment investments in 2011, recording just +16%, with Gauteng recording +33% and KwaZulu-Natal +26%.

“Business owners in South Africa seem, on the whole, extremely optimistic about the economic conditions for the year ahead,” Brehm said. “We can only hope that the post-recession upturn results in sustainable business growth for dynamic organisations nationwide.”

SAinfo reporter

Would you like to use this article in your publication or on your website? See: Using SAinfo material