South African businesses face fewer hurdles than BRIC partners

While South Africa is haunted by severe shortage of skilled labour, the country’s businesses face significantly fewer constraints to business expansion than their counterparts within the BRICS bloc.

This is according to the latest Grant Thornton’s International Business Report (IBR). David Campbell, CEO of Grant Thornton Johannesburg said 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 survey revealed that while 35% of BRIC (Brazil, Russia, India and China) 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 Campbell.

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, “Unless we address how to appropriately up-skill and educate the population, South Africa will not be able to take advantage of the accessibility and affordability of finance to drive long-term growth.”

Leave a Reply

Your email address will not be published. Required fields are marked *