South African SMEs call out for assistance from Government
Sage Business Index by Softline shows local confidence in business prospects remain stable, but confidence in SA economic prospects dips
8th November 2012, Johannesburg: Softline, part of the Sage Group PLC, today released the results of The Sage Business Index – Local and International Business Insights.
The Index is a global measure of confidence across small and medium sized businesses. Nearly 11,000 small and medium sized companies in 15 countries across Europe, North America, Brazil, South Africa and Asia responded to the survey. The Index shows that whilst there is a general decline in confidence in global and local economies, businesses remain cautiously optimistic in their own growth prospects.
In South Africa, confidence in both individual business prospects and the outlook for the global economy remain largely unchanged, down slightly from March 2012 (Index scores: 64.44 to 64.19 and 44.71 to 44.54 respectively). Confidence in South Africa’s own economic prospects has fallen slightly further from 46.11 in March 2012 to 43.03 in September 2012.
|South African Index Scores*||September 2012||March 2012||September 2011|
|Global economic confidence||44.54||44.71||45.92|
|SA’s Country economic confidence||43.03||46.11||44.10|
|Own business confidence SA||64.19||64.44||62.58|
(Below 50 is decline/less confident above 50 is improvement/more confident, 50 is no different)*
The research, which included 1 879 South African small to medium size businesses, was carried out by Populus, a UK based opinion and research consultancy firm.
Economic confidence – local concerns in line with macro-economic trends
All countries, with the exception of Brazil, registered an index score below 50 showing that respondents generally feel that the global economy is continuing to decline. Unsurprisingly, the Eurozone countries feel the most negative, with fears of a “double dip” recession having risen sharply.
In South Africa, businesses surveyed are feeling less confident about the prospects for the local economy, with the index declining from 46.11 to 43.03 over the past 6 months. This, however, is in sharp contrast with how they feel about their own business prospects which scored positively at 64.19.
Commenting at the official results presentation in Johannesburg today, Ivan Epstein, CEO (and co-founder) of Softline and Sage AAMEA (Asia, Australia, Middle East and Africa) said, “Looking at the results against an international backdrop, South Africa scored the second highest index rating of all the countries polled in terms of individual business confidence. Entrepreneurial spirit and business culture is identified by businesses as one of the most important aspects for doing business successfully in South Africa. This endorses my strong belief that South Africa is a fertile environment for successful entrepreneurs and small businesses.”
Business performance and challenges – revenues maintained, cost challenges
There are some positive signs in the global survey with 63 percent of respondents saying that over the past 6 months revenue has either increased or held steady whilst 82 percent have either increased or maintained employee numbers.
South Africa achieved a similar score with 65 percent of businesses polled showing either steady or increasing revenue and 84 percent of businesses either increasing or maintaining employee numbers.
Rob Wilkie, CFO of Softline and Sage AAMEA commented that “72 percent of South African businesses said that they have adapted to the challenges of the current economic climate. The agility and resilience of businesses in South Africa is testament to a strong entrepreneurial business culture and strength of South Africa as a place to do business”.
Increasing costs are the number one concern of businesses surveyed in South Africa. Wilkie commented that “this was expected given that CPI is on an upward trend with the main drivers being food prices, fuel and electricity. In addition, an inevitable consequence of the recent high wage increases seen in the mining and transport sectors is going to be higher inflation, particularly when decoupled from increased productivity”.
Government – businesses call on government to do more
All countries participating in the global survey feel that their governments don’t provide sufficient support for business, with the exception of Singapore where 54% of respondents indicated that their Government provides adequate support.
In South Africa businesses are calling for skills development and education (46%), the reduction of bureaucracy and legislation (40%), a reduction in business tax (34%) and currency stability (28%). Wilkie commented, “in order to enhance its competitiveness, government must address the quality of primary education, particularly in view of a very high unemployment rate. Over-regulation and red tape is a further obstacle, specifically firing and hiring practices, wage determination, public sector tender procedures and enforcement of contracts”.
Investment for growth – future prospects
In considering the year ahead, 29 percent of South African businesses surveyed said they were looking to diversify into new markets, 28 percent would invest further in marketing and sales within their existing markets and 27 percent would invest in skills development and training.
According to Epstein, “economic and political reforms in Africa have resulted in an improved business environment and offer an attractive opportunity for South African businesses to diversify and expand across their border.”
In conclusion Epstein said, “ We’ve seen evidence in this research report and others, that small and medium sized business in South Africa require more focused attention from our leaders. The future of the South African economy, and most importantly, the ability to create employment in this country will be dependent the stimulation of more businesses that are sustainable over the long term. Private business and Government have a pivotal role to play in the economic growth and development of small business in South Africa.”
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