Global Economic Confidence Drops

Global Economic Confidence Drops

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Businesses say that amidst economic uncertainty, lack of government support and rising costs they remain determined to invest for future growth. This is according to the Sage Business Index – Local and International Business Insights. Polling over 10 000 businesses across Europe, North America, South Africa and Asia, the research shows that whilst there is a general decline in confidence in global and local economies, businesses remain cautiously optimistic in their own growth prospects.

The research, which included 2 026 South African SMEs, was carried out by Populus, a UK based opinion and research consultancy firm. The global survey results revealed that business performance held steady or improved over the past six months and that despite economic challenges ahead, businesses are looking to invest for growth in the next six months.  Businesses are also calling on their governments to provide more support by reducing the red tape which they say is stifling both their growth and a general economic improvement.

Economic confidence

Across the board, businesses said that compared to six months ago, the global economy was in decline with the average index score declining 15% to 44.47.  In respect of their local economies, business confidence was higher with an index score of 47.11; however this is a sharp decline from the 57.17 previously scored.

South African businesses rated their own business prospects positively at 62.58. This is in sharp contrast with their index scores for the South African and the global economy which were much lower at 44.10 and 45.92 respectively.

Commenting at the official results presentation in Johannesburg today, Ivan Epstein, CEO and co-founder of Softline and Sage AAMEA (Asia, Australia, Middle East and Africa) said, “Looking at the results against an international backdrop, South Africa scored the second highest index rating of all the countries polled in terms of individual business confidence. Entrepreneurial spirit and business culture was identified by businesses as one of the most important aspects for doing business successfully in South Africa. This endorses my strong belief that South Africa is a breeding ground for successful entrepreneurs and small businesses.”

Business performance and challenges

In terms of international business performance there was some positive news with over two thirds of businesses surveyed showing either steady or improving revenues over the past six months. Only 12% of businesses said they were forced to reduce their number of employees.

In South Africa, 75% of businesses polled showed either steady or increasing revenue. Employee numbers remained consistent with 50% of businesses reporting that they had not increased employee numbers over the period.

The biggest challenges identified in the survey of the past six months were the rising cost of energy, fuel and raw materials (53%); winning new customers or accessing new markets (47%); maintaining or growing revenue (41%); and managing cash flow (37%). South African businesses cited similar challenges with political instability emphasised as a further concern.

Future plans

In terms of investment priorities looking forward, 41% of South African businesses intend to invest in sales and marketing 37% will consider diversifying into new markets and 32% will invest further in training and/or the launching of innovative products and services.

The role of Government
Businesses are in agreement with the factors that restrict them – irrespective of country the least favourable aspect of doing business is government bureaucracy and legislation, followed by governments handling of economic challenges.

Over half (53%) of South African businesses polled say that government bureaucracy and legislation is one of the least favourable aspects of doing business. When probed further, 62% of businesses stated employee and labour law whilst 48% said procurement and tender procedures for public sector contracts were the most cumbersome aspects. Smaller businesses further cited a lack of sufficient support and advice.

“We want to represent an honest picture of the realities facing businesses every day and most importantly define how Softline, Sage, governments and industry can further support small and medium sized businesses in both South Africa and around the world,” concluded Epstein.

* Full report available for download at blog.softline.co.za

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