South Africa can look forward to a head-start when the world economy begins to recover next year.
According to a global survey by Regus plc (www.regus.com) of more than 11 000 corporates across 15 countries, strong economic recovery is not expected to begin until summer 2010.
In South Africa, however, firms expect significant recovery to begin in May 2010. The findings indicate that companies will need to maintain their cost management strategies into the New Year and structure any major investments to catch the wave of mid-year global recovery.
Regus’ multinational global economic indicator survey, the Regus BusinessTracker, quizzed more than 11 000 respondents about their companies’ financial performance and their expectations for company and nationwide economic recovery. The resulting data offers economists a consistent survey benchmark with which to assess national economies versus global averages.
The Regus BusinessTracker survey found that South African firms expect to see signs of recovery in May 2010, which indicates a level of cautious optimism above the global average. Only India’s prediction of March 2010 is more optimistic.
South Africa’s corporate outlook on economic recovery coincides with an increase in profits that surpassed the international average: 46% of South African firms saw profits increase last year, versus 40% of companies globally. Similarly, 49% of South African companies experienced an increase in revenues last year (versus 46% globally). Even among those that experienced a decrease, 65% expect revenues to rise in 2010.
Regus’ survey revealed an almost exact consensus between high- and low-performing firms on the timing of economic recovery, indicating that their collective views were not skewed by individual performance. That said, both high- and low-performing South African businesses agree that they can look to May 2010 for marked economic advancement.
About 81% of South African companies of all sizes indicated that they expect revenues to increase next year. Small South African firms (with fewer than 50 employees) are more optimistic about next year’s figures than their larger counterparts. Among SMEs, 84% expect to see revenues increase in 2010, compared with 60% of large companies (with more than 5 000 employees). This suggests that small businesses will lead the economic recovery, and highlights the importance of government support and growth incentives for a section of the business community that is responsible for around half the nation’s turnover.
Equally, the survey revealed several significant differences between the concerns of SMEs and larger firms. Big businesses are worried about cost management, infrastructure management, and staff retention, all of which registered as above-average concerns. SMEs, on the other hand, are overwhelmingly concerned with marketing and customer retention, indicating that they are more worried about maintaining and nurturing profitable business than with cutting costs.
Johannesburg-based Joanne Bushell, CEO for Regus Africa and Middle East, comments: "Although signs of global economic recovery are starting to emerge, businesses across the services industry remain cautious. The relatively positive prediction from South African firms has to be tempered with an element of caution, with astute firms remaining tightly controlled in the beginning of next year.
"Looking forward to South Africa’s recovery period, the bullishness of small businesses may indicate that government needs to look at the levels of support being offered to SMEs. In our economy, SMEs represent about 50% of business turnover. Ignoring this community could delay national recovery.
"As we proceed along the road to recovery, there is an urgent need for businesses experiencing growth to consider new ways of doing business, to take the opportunity to learn from the past and make changes to their future strategies and operations," she says.
"This may mean shifting the way firms organise their workforce, or indeed whether they retain the same proportion of on-site, full time employees as they did before the global recession. New workforce and workplace strategies are two of the main areas where companies can look to substantially re-engineer their cost-base and move towards wider infrastructural change."