- EY survey shows a resurgence of confidence among South African middle market companies with almost one in three predicting growth above 10%
- A further 30% are targeting growth in excess of 10%, a marginal increase from 2017, when 24% of companies were in this high growth band
- 75% of South Africa middle market CEOs say they are already adopting or planning to adopt artificial intelligence (AI) within two years (last year only 8% had this view)
- South Africa continues to be placed as a diversity leader among the global cohort, with 15% of respondent CEOs being female.
Middle-market companies across the globe are significantly more optimistic about business conditions and opportunities than last year, according to the findings of the annual EY Growth Barometer 2018. This is no different for South African middle market companies, with one in one in three predicting growth above 10% for the coming year. This is the finding in EY’s Growth Barometer report for South Africa released today, which is well above the International Monetary Fund’s GDP forecast that South Africa’s economy will expand by 1.5% this year.
The global annual survey of 2,766 middle-market executives across 21 countries and nine key middle-market sectors reveals that global confidence in business growth has strengthened in the last 12 months, particularly in South Africa as indicated in the local report.
“Business confidence has soared since Cyril Ramaphosa was elected in February as the country’s president,” says Azim Omar, Africa Growth Markets Leader at EY. “Economic growth forecasts are stronger this year, where last year there was a risk that we were heading for a recession.”
In South Africa, the data shows that 58% of middle market companies are targeting growth between 6-10%, which compares favourably with only 32% of companies having the same growth ambitions a year ago. A further 30% are targeting growth in excess of 10%, a marginal increase from 2017, when 24% of companies were in this high growth band. What’s more, only 12% of respondents in 2018 expect a decline in growth, compared with 44% in 2017.
Twenty seven percent (compared to 23% for the rest of the world) of South African middle market leaders have overseas expansion as the top strategic growth priority. South Africa’s survey respondents are also among the most bullish of the Brazil, Russia, India, China and South Africa (BRICS) group, on export growth, trailing only China. South Africa’s C-suite is also keen to move into adjacent activities or sectors, a priority cited by 21%; this reflects the rise in industry convergence, which is considered the second-most disruptive megatrend by the country’s cohort. A further 18% prioritise internal growth, in line with their BRICS peers.
The race to AI adoption
Intelligent automation and machine learning have moved centre stage as vital enablers to ambitious middle-market growth. Attitudes toward new technology have evolved rapidly since last year. In 2017, 64% of South Africa middle market CEOs said they would never adopt robotic process automation (RPA), yet just 12 months later 75% of respondents say they are already adopting or planning to adopt artificial intelligence (AI) within two years.
The survey shows that South African middle market companies are evolving fast. In fact, South Africa is joint third with Singapore in the early adoption of AI, above leading economies such as the US, Russia and Germany.
Omar says: “Successful and profitable responses to convergence favour the fast. Agile companies who can adjust their offering or business model to align with a shifting consumer environment are the ones who will thrive.”
Technology is seen as a great enabler in South Africa, with 27% of respondents naming it as a key factor in improving productivity. A sign of South Africa’s IT maturity is that business leaders regard improving the customer experience as the number one purpose of technology investment, ahead of more routine uses such as improving process efficiencies and financial data. However, IT is not a universal panacea: 17% consider technological disruption as the greatest operational challenge to growth, after insufficient cash flow.
Regulation driving, not stifling, innovation
This year regulation has emerged as a new force in stimulating innovation, not obstructing it. In contrast to most of their global peers, South African middle market leaders put more regulation (26%, 17% elsewhere) above lower taxes (24%) as the best thing the Government could to boost growth.
“One of the largest media companies in South Africa says it’s lost hundreds of thousands of subscribers because of competition from unregulated streaming services,” says Omar.
Contrary to the broadly held assumption that red tape stifles growth, regulation is also cited as the third-greatest innovation driver (19%), behind profitability (23%) and competition (22%). Customer demand trails in fourth place but elsewhere the customer is paramount; when it comes to ways of increasing innovation, the preferred approach for three out of 10 (30%) is using customer data.
Concerns over cash flow and funding remain
Slow or flat global growth is a major a concern for South African middle market companies, with 27% of leaders naming it as the biggest external risk to growth, up 15 percentage points on last year. This is directly linked to their burgeoning expansionist agenda.
While access to credit continues to be an issue, this year company leaders cite insufficient cash flow as a more significant challenge, cited by around one-third (32%) of the South African C-suite, in line with elsewhere (34%). This may reflect the changing nature of sales patterns worldwide, as industry convergence, unpredictable online buying patterns, and the need to invest quickly to satisfy changing consumer demands increase the need for ready money.
The right skill set key to growth ambitions
South African executives in middle market companies are convinced that their growth ambitions are inextricably tied to the right skill set. A lack of skilled talent is named as the third-greatest challenge to growth, cited by 15% — above the rest of BRICS (8%) and elsewhere (14%). And 35% say an ideal organisational culture is one that attracts younger, digitally native talent.
More than four out of 10 (43%) South African respondents plan to increase their full-time staff numbers — in line with the rest of the BRICS (43%) but above elsewhere (38%). However, three out of 10 (30%) are more cautious and are looking to maintain current levels, versus 22% in the rest of BRICS. As globally, gig hiring is down, with only 8% planning to hire contractors or freelancers.
“The reality in South Africa of our youthful population — with 47% of the country’s 56.5 million people under 25 — may exacerbate the country’s skills challenge and explain why demographic shifts are cited as the most disruptive force facing businesses,” explains Omar.
“However, we continue, in South Africa to be placed as a diversity leader among the global cohort. With 15% of respondents’ CEOs being female, versus 3% for the rest of the world, this proportion looks set to rise even further, with almost half (46%) putting diversity at the top of their hiring priorities, compared with 41% for the rest of the world,” says Omar. “As we mark Women’s Day in South Africa this year, this is a notable achievement for the South African middle market, with many more opportunities for women business owners in the future.”
Meanwhile around the world, EY’s global data in this survey confirms that women-led companies are significantly affected by a lack of funding, with 18% citing access to capital as a major barrier to growth, compared to 11% of their male-led peers. However, 30% of female-led companies are targeting growth rates of more than 15% in the next 12 months, compared with just 5% of male-led firms, even though more than half the women-led companies (52%) say they have no access to external funding.
Omar says: “The funding gap matters because companies with high-growth potential that do not secure early investment can have a harder time scaling-up, and much of the time, these companies are led by women. Financial support for women-led businesses represents a major challenge and only a handful of organisations around the world are focused on supporting the growth of women-led businesses. In South Africa, this narrative is different, and we look forward to seeing the acceleration of more women owned businesses in this country.”
View the report online at ey.com/growthbarometer/southafrica
Herman Mashaba To Talk On City Of Jo’burg Job Creation Initiative
Herman Mashaba to talk on City of Jo’burg job creation initiative at 2019 Business Day TV SME Summit.
Leading organisations at the SME Summit
SME Insurance Checklist For New Year
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers, advises SMEs to consider the following factors when reviewing their policies.
Business owners who are planning for the year ahead should not overlook the importance of reviewing their insurance policies to ensure they are adequately covered against insurable risks.
Malesela Maupa, Head of Product and Insurer Relationships at FNB Insurance Brokers says, every year businesses face unique challenges ranging from credit and market risks, technological disruptions, compliance, operational and regulatory risks, amongst others. As a matter of precaution, insurance policies should at least be reviewed or updated once a year.
He advises SMEs to consider the following factors when reviewing their policies:
- Employee movements – if there are any employees who have left or joined the company, ensure that your policy is updated accordingly.
This type of cover normally depends on the role and contribution of the employee to the business. For instance, directors may be covered for Key Person Insurance and Directors & Officers Liability insurance.
- Protest Actions – this year is the national election year and leading up to elections we can expect to see an increase in the frequency and severity of protest actions, riots and strikes. Thus, it is essential to ensure that adequate special risks cover is in place from the South African Special Risks Insurance Association (SASRIA).
SASRIA provides cover to both individuals and businesses against special risks like civil commotion, public disorder, strikes, riots and terrorism at affordable premiums.
- Cyber risks – it is essential to communicate with your insurer or broker and find out if there are any new risks that your business should be protected against. Cyber incidents continue to be a major risk for businesses especially in the SME sector. Over the last couple of years there has been a major increase in the number of reported cyber incidences.
More businesses are now facing increased cyber threats due to their increased dependency on technology, relating to their internal and customer data being compromised by fraudsters. It is therefore essential to have some form of cyber risk insurance cover and/or enhancement of data security protocols.
- Regulatory changes – every year there are a number of regulatory changes that impact businesses directly or indirectly, which may result in fines and penalties for non-compliance.
- Natural catastrophes – the increase in the frequency and severity of extreme weather conditions, coupled with intensifying natural catastrophes will continue to have a significant impact on businesses.
Businesses should ensure they are adequately protected against these risks to avoid incurring sever financial losses.
- Business changes – should a business consider moving to a new location, purchasing new premises or venture into new business activities, these types of changes could have a major impact on its risks profile. As a result, the policy needs to be updated accordingly.
- New and Enhanced products – An innovative culture has taken over the insurance industry and ever so often we see the introduction of new products or the enhancement of existing products. Get in touch with you broker to advise you on any new products that might add value to your existing insurance portfolio.
“Reviewing your policy regularly gives you peace of mind knowing that you can focus on running your business effectively, without worrying about unforeseen risks,” concludes Maupa.
Seven Reasons Businesses Should Promote Flexible Working
By Paul Burrin, VP, Sage People
What hours did you work yesterday? Chances are, it wasn’t 9-5.
The world of work as we know it is changing. With new technology making it easier to work anywhere, anytime, the traditional 9-5 is effectively dead.
Having flexibility in their working schedule is now a key priority for employees, helping them to successfully juggle work and personal responsibilities.
In fact, more than 80% of 3,500 employees Sage People polled globally placed importance and value on flexible and remote working.
Valuing a work life balance has become increasingly important – whether this is to meet family needs, personal obligations or just to avoid rush hour – it is clear that giving employees increased control over their work schedule is good for employees, making it good for business.
With that in mind, here are seven reasons business leaders should be embracing the benefits of flexible working.
1. The world of work has changed
The line between work life and home life is much more blurred than it was just a few years ago.
For example, it’s now common for people to demand virtual meetings, the ability to work from home, and even have ‘duvet days’ when required, rather than having to suffer through the dreaded commute for hours every day.
Furthermore, modern work responsibilities are often cross-functional, requiring staff to interact with more people in different time zones.
As a result, constraints on how, where and when we work should be updated to reflect this cultural shift.
Businesses must be prepared to accept that the working world has changed if they want to truly motivate and engage employees.
2. There’s a war for talent
With top talent becoming more challenging to attract and retain, many industries are facing widespread skills shortages.
This means in-demand employees can be more selective – and the desire for flexibility is a key factor.
For example, a recent study found that 54% of people would be willing to move jobs to gain greater flexibility.
Employers who offer flexible working will attract the best talent and will also be more likely to retain these employees for longer.
3. Flexible working boosts productivity
Workforce productivity has become a global issue. Our research shows that employees are typically working only 30 hours a week, which means there’s a whole day when they’re in the office, but not actually working.
What’s more, most people who work a 40-hour week feel they are productive for only 3.75 days out of the 5-day working week.
Revolutionising productivity in new ways, such as giving employees the freedom to work in the way that best suits them, could go a long way towards narrowing the productivity gap and enabling businesses to get the most out of their staff.
4. Flexible working empowers employees, and shows you trust them
Our research also found that workers want to feel valued and recognised, with two-thirds (66%) of those surveyed seeing this as the most important aspect of their working life.
For many, this is more vital than office perks like games in the office or free food.
Giving employees the freedom to work in their own way shows they are a valued and trusted member of the team. It also empowers them to perform to a high standard and be as productive as possible.
5. It supports worker wellbeing
The health and wellbeing of staff has become more of a priority for businesses in recent years, while also being increasingly vital for employees themselves.
Over a third of employees polled (39%) believe HR and people teams could do more to improve wellness at work, with initiatives such as providing fresh fruit or offering a subsidised gym membership now proving popular.
Flexible working can help in this area by reducing stress (no more mad dashes in heavy traffic), making it something companies need to pay attention to.
6. Employees want flexible working
One of the most important reasons for businesses to embrace flexible working is simply because it’s what staff want.
According to Fuze, nearly 50% of workers across all generations want to be more mobile at work, rising to 70% for those aged 16-44.
Employees want to be able to pick up their kids from school, start and finish early if they have international calls first thing in the morning, or be able to head to a doctor’s appointment without fear they may be considered to be slacking.
Businesses would therefore be wise to listen to what their employees want and respond accordingly.
7. Technology has changed
The most straightforward argument for remote working is that staff simply no longer need to be in the office to do their jobs effectively.
Most workers now have all the tools they need on their smartphones and tablets, which means they can comfortably work from anywhere – a coffee shop between meetings, their home, or somewhere they can work undistracted.
For example, cloud technology gives employees secure access to documents externally, while collaboration and communication tools enable staff to work together from opposite sides of the globe.
Isn’t it time the way we work changed to reflect these capabilities?
Ultimately, enabling flexible working should be a focus for all businesses. From aiding talent retention, to creating positive workplace experiences – which is important to 92% of people – the long- and short-term benefits could prove invaluable.
Most importantly, giving employees flexibility will result in a happier, more engaged and more productive workforce.
In an age of continuing disruption and increasing competition, that’s not something businesses can afford to ignore.
Download Sage People’s research on what employees really want from their employers.
Start-up Advice1 week ago
6 Fundamental Steps To Consider Before Venturing Into The South African Cannabis Industry
Business Landscape1 week ago
How Algorithmic Forecasting Can Improve Business Efficiency In Challenging Economic Times
Business Ideas Directory7 days ago
300 Business Ideas To Inspire You Into Entrepreneurship
Start-up Advice1 week ago
Outdoor Versus Indoor: How Different Conditions Will Impact Your Budding Marijuana Business
Women Entrepreneur Successes23 hours ago
How A Serious Car Accident Led Founder Relebohile Moeng To Starting Afri-Berry
Lessons Learnt3 days ago
(Slideshow) Top Advice From Local Entrepreneurs That Will Change Your Business In 2019
Start-up Advice1 week ago
4 Things Nobody Tells You About Entrepreneurship
Company Posts1 week ago
Success Fuelled By Partnership