South African business is booming
1 February 2007
South African business expectations for growth in key areas such as turnover, profitability and employment are higher than ever before, according to the latest International Business Report by consultants Grant Thornton.
Releasing the 2007 International Business Report - previously known as the International Business Owners Survey - on Wednesday, Grant Thornton said in a statement that 82% of medium to large privately held businesses in the country expect an increase in turnover for 2007, up from 71% in 2006.
Sixty-two percent expect to increase their profitability (up from 54% in 2006), the survey found, while 22% expect to grow their exports (up from 18% in 2006).
The biggest jump in expectations was for growth in employment, from 32% who expected to employ more staff in 2006 to 53% in 2007.
Fifty-nine percent of companies surveyed said they would be investing more in plant and machinery in 2007, up from 48% in 2006. The only indicator where expectations dipped was for investment in new buildings, with 30% saying they would be increasing their investment this year, down from 33% last year.
Seventh most optimistic country
At the same time, Grant Thornton reported that South African business optimism had dropped from 2006, with 74% of companies saying they were optimistic about the year ahead compared to 80% last year.
However, this still left South Africa as the seventh most optimistic of the 32 countries surveyed - and well ahead of the global optimism average of 45%.
Grant Thornton attributed this "anomaly of lower than usual optimism during a business boom" to non-business factors such as increased crime and political uncertainty regarding the succession in South Africa's presidency.
Neil Higgs, director of Research Surveys, which conducted Grant Thornton's Sout Africa research, said there had been a drop in overall confidence measures during the middle to latter part of 2006, due to concerns over softer exchange rates, rising interest rates and fuel price increases, exacerbated by these non-business concerns.
However, Research Surveys "had noted an improvement as the year closed, signalling better prospects for 2007."
India tops, US drops
At 97%, up from 93% in 2006, India is the most optimistic country for the third year running, according to the survey. The Philippines, 88% of whose companies expressed optimism for 2007, jumped from fifth to second place.
By contrast, Turkey showed a massive drop in optimism in the past year, from 58% to 0%, "probably reflecting frustrations it has faced in its negotiations to join the EU," Grant Thornton said.
The US has also experienced a substantial drop in optimism, according to the survey, from being the second most optimistic country five years ago (42%) to being the fourth most pessimistic (14%) for 2007.
Although below the global average, Botswana, the only other sub-Saharan country to participate in the survey, experienced the greatest increase in optimism, from -12% to +41%. Jay Ramesh, managing partner of Grant Thornton Botswana, credited this to the government's increased focus on the mining sector.
"Over the past year we have seen the establishment of diamond cutting and polishing industries, the shifting of part of the activities of the diamond trading centre from London to Botswana, and the development of the copper and nickel refining project," Ramesh said. "These actions are expected to fuel the increase in economic activity."
Grant Thornton's 2007 International Business Report is based on research conducted among medium to large privately held businesses in 32 countries, covering more than 7 200 respondents. In South Africa, research was conducted by Research Surveys among 200 privately held businesses employing between 100 and 400 staff.
SouthAfrica.info reporter
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