core sector communique

South Africa beats BRICS for business expansion ease

Business expansion faces fewer constraints in South Africa than in the rival high-growth BRIC economies of Brazil, Russia, India and China, according to a new survey.

The quarterly Grant Thornton International Business Report (IBR), which surveys over 12,000 listed and privately held businesses in 40 economies annually, 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.

Similarly, 34% of BRIC respondents felt constrained by the prohibitive cost of finance, compared to 17% in South Africa. 29% of businesses in the BRIC nations 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 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," says David Campbell, CEO of Grant Thornton Johannesburg.

Campbell adds that South African businesses should view this local strength as an opportunity to make progress through long-term investments in research and development (R&D) and equipment that will place companies at an advantage once the developed world moves out of this recessionary period.

The IBR research reveals that businesses in the emerging markets lead the way in investing for long-term growth. 45% of businesses in the BRIC countries plan to increase investment in research and development over the next year, compared to just 18% of businesses in the G7. Similarly, 47% of BRIC businesses plan to increase investment in plant & machinery over the next 12 months, compared to 37% in the G7.

He says that regardless of this opportunity, South Africa’s growth will continue to lag behind BRIC nations unless the endemic skills shortage is properly addressed.

Despite South Africa’s relative advantage in some areas, the survey once again identified the lack of a skilled workforce and overregulation and red tape as the two biggest blockages for economic growth in Q2 of 2012.

38% of South African executives said that the skills shortage affected their business (36% BRIC), while 37% believe that overregulation and red tape were hindering growth (36% BRIC). The survey revealed that both South Africa and the BRIC nations are more exposed to these constraints than the rest of the world (Global: 27%).

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

Grant Thornton South Africa employs 824 people in offices in the major commercial centres of Cape Town, Durban, East London, Johannesburg, Nelspruit, Port Elizabeth and Pretoria. South Africa is also a major force in the sub-Saharan Africa network, with member firms in Botswana, Guinea, Kenya, Mauritius, Mozambique, Namibia, Senegal, Uganda, Zambia and Zimbabwe.