South African directors are less positive about business and the economy than they have been over the last few years.
This is one of the findings of the 4th Edition of the South African Directors’ Sentiment Index Report released by the Institute of Directors in South Africa (IoDSA).
The research aims to establish the perceptual position of South African directors on economic, business, governance and directorship conditions, as well as track this sentiment over time.
The report shows that the slowly-increasing positive sentiment trend over 2016 -2018 for economic and business conditions has declined. The sentiment for governance and directorship conditions remains positive, although there was a very slight decline in the level of positivity for these conditions in 2019.
According to Vikeshni Vandayar, executive: governance and corporate services at the IoDSA: “Since the inception of the Index, South African directors have felt more positive than negative around governance conditions in South Africa. South African directors continue to feel that the application of good governance practices add value to businesses.
“This year we saw South African directors feeling more positive towards the board adequately setting the tone of ethical conduct through their ethical leadership. The latest results and trends seem to indicate that South African directors are positive that governance practices can improve and that board members do have a large influence and ability to set the tone.”
The economic outlook shifted from positive to negative.
With a general negative sentiment across all of the economic perceptions of South Africa, the 2019 sentiment decreased to a level comparable to that of the sentiment in 2017.
Skilled labour and labour demands in South Africa over the next 12 months had the highest negative sentiment rating.
The projected health of first world countries over the next 12 months had the highest positive rating.
For the fourth consecutive year, South African economic uncertainty remains the top economic factor impacting both business and industry.
Sentiment around business remains more negative than positive.
There was general negative sentiment towards the business conditions in South Africa, with the level of negativity returning to the sentiment rating level of 2017.
Both the efficiency and sufficiency of infrastructure in South Africa improving, and the level of red tape and its impact on business decreasing in the next 12 months received the highest negative rating.
Business prospects improving in the next 12 months received the most positive rating.
Poor economic conditions and poor consumer confidence was the highest- ranking business factor impacting business and industry.
Governance sentiment remains more positive than negative, with the board adequately setting the tone of ethical conduct through ethical leadership receiving the most positive sentiment in 2019.
There has been a noticeable negative shift on the application of good governance practices adding value to business.
Respondents have rated lack of sustainable thinking as the top governance challenge impacting their business, whereas unethical behaviour was considered the greatest challenge impacting their industry.
General positive sentiment to directorship conditions resulted in this being the most stable of the elements since the start of the study in 2016.
The most negative sentiment of respondents was towards the suitability of skills, experience and independence of individuals serving on boards.
Continuous professional development impacting positively on board performance was viewed by both IoDSA and non-IoDSA member has having the most impact on directorship conditions.
Ethical behavior was rated the top factor influencing a respondent’s willingness to serve on a board.