South African company directors feel predominantly negative about economic conditions facing the country in coming months, and are also increasingly concerned over a shortage of skilled labour as well as sometimes onerous union demands.
That’s the top line from the 2021 Institute of Directors in South Africa (IoDSA) Sentiment Index – the sixth iteration of the study. The survey seeks to gauge how South African directors view the current operating climate. It was conducted earlier this year when South Africa was on a national adjusted Level 3 lockdown due to the rising cases of Covid-19.
Vikeshni Vandayar, executive: governance and corporate services at IoDSA, says while serious macro-economic concerns understandably remain around the boardroom table, there is a welcome upside in that the perception of general business conditions has improved from 2020. She believes this may be because of the positive adaptation to the so called new normal conditions of remote and virtual working.
This year’s survey included key questions around technology and its uptake given the Covid-19-driven move to a virtual workplace. It’s an issue that patently needs more top-level attention with just 46% of respondents believing boards are devoting enough time to discussion around technology and its future role.
Only half of those surveyed believed that directors had a high-level understanding of cybersecurity risks.
Vandayar says that, while directors are learning to live with the flux and mutability caused by the pandemic, most respondents still feel the uncertainty of the South African economy has impacted their business the most. To that end, corruption and inadequate government service delivery remain in the top ranked challenges affecting business. Energy security is not as much of a concern as it was two years ago but still ranks highly along with inadequate government service delivery.
The IoDSA Director Sentiment Index polls the views of close to 500 directors mostly in an executive capacity. Fifty-nine percent were executive directors and 41% non-executive directors.
In terms of the daily operating business climate, those polled believe that general business sentiment is starting to improve with brighter prospects ahead in the next year. But, says Vandayar, the most negative sentiments remain the level of red tape and its impact on business, poor consumer confidence, an over regulated environment, high tax levels and a lack of infrastructure development.
“It’s testimony to the resilience, fortitude and application of directors in South Africa that in spite of myriad challenges, many of their businesses remain operational and robust,” she says.
The Index shows that South African directors feel positive towards current governance conditions in South Africa, but it must be noted that this positive sentiment has been decreasing since the survey started in 2016.
Vandayar notes: “Directors felt the most positive about boards adequately setting the tone of ethical conduct through their ethical leadership and most negative about the implementation of good corporate governance practices improving in the next 12 months. The top governance challenges are lack of sustainable thinking and a lack of understanding of the overall benefits of good governance.”
In terms of the job itself, directors are buoyed that continuous professional development is impacting positively on-board performance but there is concern over the willingness of some directors to take risks that could hinder innovation and growth. In terms of what motivates a director’s willingness to serve on a board, the top factors are a strong adherence to ethical behaviour independence and maintaining and preserving a company’s reputation.