CFOs survey reveals expectation of flat economic growth trends: Deloitte

 Chief Financial Officers (CFOs) in major South African corporations see 2012 as the year of “balancing acts”, a survey conducted by Deloitte shows.

The perception survey conducted amongst CFO’s reveals a dominant expectation that the South African economy will “mark time during 2012 and begin perking up next year”.

The other key expectations were that the SA Reserve Bank will be occupied counteracting inflation and stimulate growth in monetary policy, while major companies operate in survival mode and will simultaneously attempt to target growth.

At the base of the balancing act for 2012, said Deloitte, were political and economic climates that are preventing management from making bold decisions.  CFOs of the – companies surveyed mirrored this through concerns about the regulatory environment, competitiveness, and liquidity within their companies, skills and the major political risks.

“These concerns and the balancing acts raised in the survey should be seen against the background of a local economy that is showing reasonable growth, but that is conscious that Europe could slide back into recession as a result of the continuing sovereign debt crisis, said Rodger George, Lead Survey Consulting Director, Deloitte. “SA businesses are anxious that having survived the recession of 2009, they may shortly need to endure another.”

George said the global economic malaise is perceived as the most significant risk factor for the next 12 months.

Grant Krog, Lead Survey Assurance Partner at Deloitte said “It is clear that business is putting the brakes on. Retention of cash for liquidity is now the priority, with investment in new capacity falling to second place on the cash flow priority list. With Capex being cut to the bone during the 2009 recession, companies are now playing catch-up with their pent up demand. Due to the emphasis on liquidity, Research and Development have suffered severely, raising the danger that companies are not investing sufficiently for the future.” Says

About 30% of CFOs rated regulation as the greatest burden they carry. A further 22% identify this as their second or third greatest worry. “The potential impact of government policies on business are seen to be more important in 2012, with 39% of CFO’s citing this as their major political concern. There is also uncertainty surrounding policy on several different fronts, creating a vacuum, said Johan Erasmus, Associate Director.

“The responsibility of compliance with increasingly onerous legal requirements is impacting negatively on company performance and flexibility. The King III code of corporate governance has more than 70 principles that companies need to comply with. This represents a further area in which CFOs must balance their activities and they are clearly concerned about this trend,” said Erasmus.

CFO’s also said the shortage of appropriate skills remains one of the ‘top three’ concerns facing business. They also viewed corruption as their greatest political concern, with 45% listing it as one of their top three political concerns.

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