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Service delivery still impacts SA business

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Grant Thornton’s latest quarterly survey on privately held business owner’s perceptions highlights that utilities such as gas and electricity, is having the greatest negative impact on businesses in terms of government service delivery. The survey also reveals that poor government services relating to billing issues (rates and taxes) and roads concerns (potholes and traffic lights) are adding undue pressures to businesses.

The Grant Thornton International Business Report (IBR) provides quarterly tracker insights into the views and expectations of over 11,500 businesses surveyed in total per year across 40 economies. The Q1 data for IBR 2012 also highlights regional and national business owner perceptions regarding crime, service delivery and political climate for SA business owners.

“Poor government service delivery and uncertainty regarding the political direction has been high on the agenda for South African business owners in every quarterly survey we’ve ever conducted,” says Deepak Nagar, the national chairman for Grant Thornton South Africa. “It’s concerning that the nation’s government doesn’t add valuable input into the success of business, and instead causes undue pressures to business operations.”

The Q1 Tracker for 2012 highlights that the entire nation is battling with poor service delivery of utilities such as gas and electricity, but it also indicates that businesses in the Western Cape are most affected by billing concerns (Western Cape: 19%; Gauteng: 17%; Eastern Cape 14% and KZN 10%). Conversely, KZN and Gauteng seem to struggle with road issues, particularly potholes and traffic lights negatively impacting business performance (KZN: 21%; Gauteng: 18%; Eastern Cape: 15% and Western Cape: 10%).

In addition to poor Government service delivery issues, businesses have consciously admitted that political uncertainty is causing executives to delay the making of important business decisions. The Q1 2012 Tracker records that 28% of South African executives are putting off making important investment decisions because of political uncertainty across the country (2011: 24%) and 24% of business owners have admitted they’d rather invest offshore than in South Africa (2011: 24%).

“It is encouraging that the data highlights fewer business owners stating political uncertainty as a concern causing them to consider selling their business, compared to responses recorded in 2011,” says Nagar (SA 2011: 17% versus SA 2012: 15%). “Our economy does need to provide a more stable investment environment though, to encourage more businesses to speed up investment decisions and to start investing domestically again.”

As in Q4 2011, Grant Thornton’s latest quarterly survey on privately held business owners’ perceptions highlights that 37% of South African executives rate over-regulation and red tape as the biggest constraint to business expansion.

This is the second time in six years that over-regulation as a business constraint surpasses SA business owner frustrations relating to the lack of availability of a skilled workforce with 35% (Q4 2011: 36%) of business owners noting this as a challenge.

“It’s clear that the plethora of regulation and red tape in SA as well as a poorly skilled workforce are continually ranked high by business owners in terms of constraints to expanding business operations,” continues Nagar. “The problem persists on impeding business growth and the matter needs to be addressed as a matter of urgency.”

Business owner perceptions in South Africa, compared to the issues raised by BRIC countries differ slightly by order of importance, with the following rankings of business constraints recorded in Q1 2012 for BRIC economies:

* A lack of availability of a skilled workforce (BRIC: 36% )

* Regulations/ Red tape (BRIC: 35%)

* Shortage of orders/ Reduced demand AND Cost of Finance (BRIC: both 32%)

* Shortage of working capital AND Shortage of long term finance (BRIC: both 29%)

* Transport infrastructure (BRIC: 21%)

* ICT infrastructure (BRIC: 19%).

When business owners were asked if they or any of their staff and immediate families had been directly affected by a threat to personal security (incl. road rage, hijackings, housebreakings and violent contact crime) in the past 12 months, the Q1 2012 data reveals that this figure continues its downward trend, which is encouraging. The first quarter data for 2012 indicates that 45% of respondents confirmed they had been affected by crime (2011: 46%).

Nagar states that the national data for Q1 2012 is almost 40% lower than what was recorded in the first survey taken in 2007 (84%). “While it is certainly pleasing to see this figure declining steadily over six years, 45% is still surprisingly high and we have a long way to go to see crime being properly eradicated from our daily lives,” he says.

When asked in what ways crime had financially impacted business, the increased cost of security is a South African executive’s greatest expense, with 51% affirming this.

“One wonders if the effect of crime on business is declining as a direct result of SA businesses’ continued and significant investment in personal security systems, armed response and perimeter guarding systems,” says Nagar.

Other financial impacts that crime has on business include a decline in staff motivation (19%), productivity (12%) and creativity (17%), a loss of staff (11%) and even a loss of customers (12%).

When asked whether business owners had considered emigrating from South Africa, Q1 2012 reveals that 20% have indicated that they have given serious consideration to leaving South Africa permanently. This is figure is unchanged from 2011, and it is marginally up from 18% in 2010 but significantly down from 30% recorded in 2009.

“The data affirms our other IBR results in that crime, political uncertainty and government service concerns are the greatest impacts affecting South African private business owners,” adds Nagar. “These same factors are prompting emigration considerations.” Nagar notes that all factors are ranked higher by business owners for Q1 2012, compared to 2011 with poor quality of healthcare (2011: 22%; 2012: 34%) and education (2011: 27%; 2012: 38%) growing as a concern prompting business owners to consider emigrating.