SA's business confidence stalls in continued global business volatility

Kirsten Morgendaal, Regus Area Director.

A sharp decline in business confidence in many rapid growing economies is raising a warning flag that global business may face continued volatility for some months to come.

In South Africa, confidence levels have remained largely unchanged, dropping 1 point in the Regus Business Confidence Index (from 117 to 116) since April 2012.

Business confidence in some of the world’s leading growth economies has dropped significantly over the last six months. Despite the fall, levels of business confidence in rapidly growing economies still remains well ahead of levels in mature economies – yet this setback should act as a warning flag for businesses across the world to stay nimble and expect further volatility before a general global upturn, finds the latest Regus Business Confidence Index (BCI) based on the views of more than 24,000 senior business people from 92 countries.

In South Africa, the Business Confidence Index rating is lower for small businesses (111) than for large firms (132)and, given the important role of small and medium-sized enterprises as an engine of growth and provider of jobs, this finding is of particular concern. Access to affordable credit and cash-flow management were among their biggest concerns, highlighting the need for flexible, pay-as-you go business services allowing businesses to remain flexible and agile.

Key Findings and Statistics

•    Global confidence levels have shown little change compared to six months ago; down 2 percentage points to 111 since April 2012.
•    The proportion of South African companies reporting revenue increases improved slightly at 50% compared to 43% in April 2012; profits did not change at all (39%);
•    Only just over a quarter (29%) of South African respondents reported they were satisfied their government’s support strategies for business;
•    The following issues are major challenges to small businesses and start-ups:
   -    cash-flow (67%)
   -    sales (30%)
   -    administrative tasks (26%)
•    Respondents also highlighted key measures for government to introduce that would substantially help small businesses and start-ups. These are:
   -    tax exemptions (71%)
   -     low interest loans (61%)
   -    mentoring schemes (36%)

“It’s clear that there’s been a stagnation in business confidence, accompanied by significant falls  in some rapidly developing economies since our last BCI report in April,” said Regus’ spokesman Kirsten Morgendaal, Area Dircetor. “This suggests that slowing trade with Europe and Western economies, combined with a host of national factors, is taking its toll. In South Africa, unrest in the mining sector is expected to affect production and demand, but also allowing the central bank to keep interest rates low.”

Kirsten said: “We were particularly struck by slower improvement amongst entrepreneurs and small businesses. In order to improve their cash situation, respondents identified affordable and flexible business services – especially for overheads such as workspace, administrative support and sales/marketing. 45% of respondents, for instance, reported that one of the major burdens during the downturn has been inflexible property leases. Flexible services allow businesses to be more agile and free-up cash for investment without relying on credit at a time when it is so difficult to secure.”