Executives in South Africa among the most pessimistic of the world

01 December 2017 Authored by Consultancy.co.za

Executives in South Africa are currently the second most pessimistic among their global peers, according to a new study. Nearly three quarters of the executives highlight that turbulence in the South African economy over the past six months has affected business operations and decisions.

The study, conducted by professional services firm Grant Thornton, was held globally, with 9,600 CxO level executives in privately-held and listed businesses across more than 36 economies that participated. The respondent base for South Africa was around four hundred.

The third edition of the quarterly research shows that economic instability is seeming to become the ‘new normal’ in South Africa. 68% of the South African managers stated that they were delaying business expansion plans, 61% were putting off investment decisions, 38% were considering investing offshore and 28% were contemplating selling their businesses. The top four constraints identified to business growth are economic uncertainty (59%); exchange rate fluctuation (48%); rising energy costs (34%); and over-regulation / red tape (33%).

“The findings portray a nation that is experiencing total uncertainty with no sign of any stability on the horizon,” said Gillian Saunders, Head of Advisory Services at Grant Thornton. “The fact that businesses are delaying important investment decisions or expansion plans, coupled with a challenging economic environment, indicates they are just managing to keep their heads above water, with operations stagnant ‘in a holding pattern’ of sorts. It’s very concerning.”Economic optimism in South AfricaA similar pattern is visible in the outlook for the South African economy. Executives score a -6% rating on their outlook. This statistic is determined by calculating the percentage of respondents who reported a positive outlook, subtracting the percentage who reported a negative outlook for the year ahead. The result makes South African executives the second most pessimistic of all countries studied, trailing just Japan, which stands at -14%.

From bad to worse

Saunders: “For South Africa, most of 2017 has been marred by political upsets and these were followed by subsequent downgrades of the nation’s sovereign credit rating by key ratings agencies. Then, towards the end of the third quarter massive ructions occurred with further developments which drew the nation deeper into the ‘state capture’ debacle, and more concerning revelations were uncovered regarding high profile private companies with suspicious Gupta ties. The year is going from bad to worse.”

The pessimistic outlook from the accounting and consulting firm mirrors key findings of a recent study that was released by the World Economic Forum (WEF), a global think-tank that partners with academia, consultancies and other knowledgeable experts to create renowned research across economy, society and industries. In the 2017 edition of its ‘Global Competitiveness Report’, South Africa’s overall ranking declined 14 places to 61st position from 47th. The survey cited political instability, poor work ethic, restrictive labour regulations and an inadequately educated workforce as some of the key reasons for the decline. Asked how the country could turn its fortunes, Saunders said, “It is crucial for everyone in every corner of the country, and across private business, government and public sector, to start working collaboratively to try and re-establish some stability for our nation.”

The plea from Saunders follows days after William Mzimba, the Chief Executive of Accenture in South Africa and Chairman of Accenture Africa, warned that South African businesses need to up their collaborative efforts to better harness the country’s innovation potential. According to his firm’s latest innovation study, South Africa is underperforming in its innovation execution.

Related: CEO Survey: African executives confident of growth in middle term.

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