Tag Archive: SA economy


Sage Business Index by Softline shows local confidence in business prospects remain stable, but confidence in SA economic prospects dips

8th November 2012, Johannesburg: Softline, part of the Sage Group PLC, today released the results of The Sage Business Index – Local and International Business Insights.

The Index is a global measure of confidence across small and medium sized businesses. Nearly 11,000 small and medium sized companies in 15 countries across Europe, North America, Brazil, South Africa and Asia responded to the survey. The Index shows that whilst there is a general decline in confidence in global and local economies, businesses remain cautiously optimistic in their own growth prospects.

In South Africa, confidence in both individual business prospects and the outlook for the global economy remain largely unchanged, down slightly from March 2012 (Index scores: 64.44 to 64.19 and 44.71 to 44.54 respectively). Confidence in South Africa’s own economic prospects has fallen slightly further from 46.11 in March 2012 to 43.03 in September 2012.

South African Index Scores* September 2012 March 2012 September 2011
Global economic confidence 44.54 44.71 45.92
SA’s Country economic confidence 43.03 46.11 44.10
Own business confidence SA 64.19 64.44 62.58

(Below 50 is decline/less confident above 50 is improvement/more confident, 50 is no different)*

The research, which included 1 879 South African small to medium size businesses, was carried out by Populus, a UK based opinion and research consultancy firm.

Economic confidence – local concerns in line with macro-economic trends

All countries, with the exception of Brazil, registered an index score below 50 showing that respondents generally feel that the global economy is continuing to decline. Unsurprisingly, the Eurozone countries feel the most negative, with fears of a “double dip” recession having risen sharply.

In South Africa, businesses surveyed are feeling less confident about the prospects for the local economy, with the index declining from 46.11 to 43.03 over the past 6 months. This, however, is in sharp contrast with how they feel about their own business prospects which scored positively at 64.19.

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 is 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 fertile environment for successful entrepreneurs and small businesses.”

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Business performance and challenges – revenues maintained, cost challenges

There are some positive signs in the global survey with 63 percent of respondents saying that over the past 6 months revenue has either increased or held steady whilst 82 percent have either increased or maintained employee numbers.

South Africa achieved a similar score with 65 percent of businesses polled showing either steady or increasing revenue and 84 percent of businesses either increasing or maintaining employee numbers.

Rob Wilkie, CFO of Softline and Sage AAMEA commented that “72 percent of South African businesses said that they have adapted to the challenges of the current economic climate. The agility and resilience of businesses in South Africa is testament to a strong entrepreneurial business culture and strength of South Africa as a place to do business”.

Increasing costs are the number one concern of businesses surveyed in South Africa. Wilkie commented that “this was expected given that CPI is on an upward trend with the main drivers being food prices, fuel and electricity. In addition, an inevitable consequence of the recent high wage increases seen in the mining and transport sectors is going to be higher inflation, particularly when decoupled from increased productivity”.

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Government – businesses call on government to do more

All countries participating in the global survey feel that their governments don’t provide sufficient support for business, with the exception of Singapore where 54% of respondents indicated that their Government provides adequate support.

In South Africa businesses are calling for skills development and education (46%), the reduction of bureaucracy and legislation (40%), a reduction in business tax (34%) and currency stability (28%).  Wilkie commented, “in order to enhance its competitiveness, government must address the quality of primary education, particularly in view of a very high unemployment rate. Over-regulation and red tape is a further obstacle, specifically firing and hiring practices, wage determination, public sector tender procedures and enforcement of contracts”.

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Investment for growth – future prospects

In considering the year ahead, 29 percent of South African businesses surveyed said they were looking to diversify into new markets, 28 percent would invest further in marketing and sales within their existing markets and 27 percent would invest in skills development and training.

According to Epstein, “economic and political reforms in Africa have resulted in an improved business environment and offer an attractive opportunity for South African businesses to diversify and expand across their border.”

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In conclusion Epstein said, “ We’ve seen evidence in this research report and others, that small and medium sized business in South Africa require more focused attention from our leaders. The future of the South African economy, and most importantly, the ability to create employment in this country will be dependent the stimulation of more businesses that are sustainable over the long term. Private business and Government have a pivotal role to play in the economic growth and development of small business in South Africa.”

To view the full article, please visit http://businessindex.sage.com/

For more, please follow Softline on Twitter http://twitter.com/SageGroupZA

By Gerhard Hartman, Head of the Africa Division at Softline VIP, part of the Sage Group plc.

Gerhard Hartman

Gerhard Hartman

The African continent has enjoyed its best growth decade on record and is currently one of the world’s fastest growing regions, with six of the ten fastest growing economies in the world. It therefore makes business sense for South African firms to look at expanding into Africa and opening branches in other parts of the continent.

Companies expanding into Africa either need to send South African staff into these countries as expatriates or need to open an operating entity in that country that comprises of local staff members. Either way, companies face challenges in expanding into Africa, especially in setting up their auditing, taxation, accounting and payroll systems that are accurate and compliant with the local legislation of that African country.

In response to this trend, and in an attempt to aid local companies with their expansion plans into Africa, Sage VIP Payroll has partnered with BDO Audit – Advisory and Tax services – and Sage Pastel Evaluation to provide local companies with everything they may need to enter a new country of operation, with confidence.

One of Sage VIP Payroll’s main strategic goals is focused around expansion into Africa with the company currently being operational in 24 African countries. The VIP Payroll Africa Division holds offices in Gaborone, Windhoek and Nairobi; with active alliance partnerships in Zimbabwe, Zambia, Malawi, Nigeria, Ghana, DRC, Kenya, Tanzania, Uganda, Angola, Mozambique and Rwanda.

Companies in Africa are starting to realise the importance of automation and how VIP Payroll can help them make more informed decisions, creating more efficient environments for company growth and return on investment. Salaries continue to be one of the biggest expenses in any organisation while the market for employment is becoming more competitive, making HR an essential part of any company’s strategic advantage. VIP Payroll provides an integrated solution for any size business to manage salary payments and HR strategies effectively. The system enables statutory compliance with authorities in African countries and local support is provided through alliance partners in the country of operation.

BDO has a large amount of experience servicing multi-national companies from across the globe. The organisation aids companies to build a country specific business model for operations in Africa. BDO also has contacts and alliance partners in every country in Africa, except Somalia, making it the best business to partner with when expanding into Africa. BDO’s three phase process includes advising companies on the implications of doing business in another African country, implementation of licensing, permits, registrations and applications in that country, and setting up compliance and business controls for payroll, auditing and accounting.

Common mistakes that companies make when expanding into Africa include not having sufficient knowledge of the country and a lack of operational planning. Preparation is essential as is a solid understanding of the local tax laws and company legislation. Companies also need to educate themselves on the foreign exchange regime, economic environment, legal system and the foreign company processes in each country.  This is where BDO is able to aid companies with relevant information that will adequately prepare them for their new venture.

Pastel Evolution has been operational in Africa since 2001 and has offices in South Africa and Kenya. The organisation has over 2500 corporate customers in Africa and over 70 business partners on the continent, as well as 15 project implementation consultants and 50 call centre support staff. Pastel Evolution empowers business management through finance, inventory management, relationship management, payroll and business intelligence. These systems streamline business processes and enable employees to make informed decisions.

Many companies make the mistake of purchasing systems for accounting, HR, payroll and auditing to be used in their new African venture, that do not offer the in-country support that is needed to implement the software, nor is it compliant with the local legislation.

VIP, BDO and Pastel have a support base of local partners that are more than able to provide tried and tested advice in addition to on-site support to African businesses. All VIP, BDO and Pastel software is customised to comply with local legislation, which effectively takes the hassle out of setting up branches in other countries.

Hard Facts about Africa

  • The 1 billion people that live on the African continent comprises 14% of the global population, half of which are under the age of 35 and nearly half live in cities.
  • The African economy of $1,6-trillion is expected to grow to 2,6-trillion by 2020.
  • Since 2009, Angola, Nigeria, Ghana, Zambia and DRC have been top investment destinations.
  • In 2012 Ghana is expected to show the strongest GDP growth, with Nigeria in fourth position.
  • New investment destinations also include Equatorial Guinea, Guinea, Madagascar, Gabon, Cameroon, Mozambique, Liberia and the Congo.
  • The main sectors for investment in Africa include mining, construction, property development, retail, supplier services to the oil, gas and mobile telephone industries, ICT, security, agriculture, tourism and hospitality.

Doesn’t it make absolute sense to invest in Africa?

In September 2011, Softline launched the Sage Business Index in South Africa. Softline joined the Sage Group plc eight years ago and while the group had run the Index a year prior, South Africa did not participate. The Sage Business Index surveys small businesses across Europe, North America, South Africa and Asia, aims to reveal a definitive landscape for small businesses confidence, concerns and challenges on a bi-annual basis.

With the 2012 annual Sage Business Index fast approaching, we took a quick step back to review the results of the half year research conducted in March this year. Polling over 10 000 businesses across four continents, the Index showed that while confidence in the global economic outlook continued to decline, the outlook for local market conditions and businesses was improving. Interestingly, South Africans were slightly more pessimistic than their global counterparts about the outlook for the global economy, with a 1.21 decrease in the Index score, compared to the .52 decrease of the global sample at the time.

In March, CEO of Softline and Sage AAMEA (Africa, Asia, Middle East and Australia), Ivan Epstein said that it was encouraging to see that once again, businesses in South Africa were more confident about their own prospects. He went on to say that companies are focussed on the day-to-day challenge of maintaining and improving their businesses, and Government should do all they can to harness and help the entrepreneurial spirit that already exists.

Epstein said that he was interested in researching the impact of increasing fuel prices on local sentiment. With this week’s additional price hike, it’s clear that business and consumers alike are facing challenges.

The Index scores in March 2012 and September 2011 were as follows:

March ’12 September 11
Index Scores Global SA Global SA
Global economic confidence 43.95 44.71 44.47 45.92
Country Economic Confidence 47.26 46.11 47.11 44.10
Business Outlook 58.86 64.44 57.88 62.58

(Below 50 is decline/less confident above 50 is improvement/more confident, 50 is no different)*

The results in March 2012 also outlined that while local confidence was increasing and the rate of decline in global confidence slowing, there were still a number of challenges facing businesses. Rising inflation and the increasing cost of fuel, energy and raw materials topped the list with all countries citing this as their top concern – with 58% of local businesses listing this as their number one concern. Over a third of South African businesses noted instability or uncertainty in the local economic market as a worry, and a similar proportion (34%) said the same of reduced cash flow in the supply chain.

In anticipation of the upcoming Index, Epstein says that the Index has proven itself as a vital tool for Softline and Sage in the region to take stock of the challenges and worries affecting customers. “I hope that the upcoming results show us that the sentiment amongst businesses remain stable given the current economic climate.”

By Charles Pittaway, Managing Director of Netcash

Charles Pittaway shares his other 5 tips for surviving the entrepreneurial experience.

Charles Pittaway

5. Accountability

I love working in flat organisations without lots of structure and hierarchy – it’s one of the reasons I started Netcash. But it would be naïve to think we could survive without some structures and channels for making decisions.  When people start looking for direction, they need to know where it’s coming from.

6. Isolation at the top

Even if you keep an open door and employees know they can give you honest feedback, sometimes you need a trusted advisor outside the business. Your lawyer or accountant is not necessarily the right person – how many of them run their own businesses?   Find a mentor or peer group of other entrepreneurs who have faced the same issues.

7. Leverage

It’s tempting to fund a business with debt and keep 100% ownership – but very dangerous. Your bank is not your partner and it has no real stake in the success of your business – if things go wrong it’s got your house, your car and everything you own to fall back on.  An equity partner, on the other hand, has got to pitch in to make the business work. As the saying goes, it’s better to have 50% of something than 100% of nothing.

8. Too many eggs in one basket

It’s great to have a bread-and-butter client, a big account that keeps the money rolling in. But if you lose that client, your entire business could be at risk.  Keep your client base as diverse as possible – and if you can’t, make a plan for what you will do if you lose that account.

9. Competitive advantage

One successful product or service doesn’t make a business. If you really have found an attractive market, you can bet there are competitors looking to take a piece of it. Keep on researching, developing, introducing new products and new levels of service.  Make the competition scramble to keep up, rather than digging yourself a static position and defending it with everything you’ve got.

10. Moving on

At some point in the life of almost every business, the original founder needs to step aside and let someone else manage it. The skills and attitudes needed for a successful start up are very different from those needed to manage a stable, mature company.  If you stay on past your sell-by date, you run the risk of poisoning the business.  Rather get out while you’re ahead and either enjoy the rewards of success, or move on to a new challenge. Then read this advice all over again.

By Charles Pittaway, Managing Director of Netcash

Charles Pittaway

Doing business in 2012 is as challenging as ever, especially with the on-going recessionary influences in South Africa and abroad. Added to this, those setting out to start a new business are faced with the ever-rising cost of fuel as well as energy and raw materials and the tightening purse-strings of possible investors.  If one were to review the reasons for a failed business, mistakes in marketing, finance and employment are hardly ever the primary factors. Many companies go under despite a solid product offering, skilled resources and detailed financial plans:

1. Agreeing the terms of engagement

A lot of businesses are started by two friends or colleagues who agree to split the equity and the decision making. Unfortunately, these deals have a history of falling apart, usually painfully and expensively.  Sooner or later one partner begins to feel their own contribution is more valuable than the others.  And if there is no mechanism for handling these differences, you’re in trouble.  It’s a good idea to workout out a buy-sell agreement at the start if the business to govern what will happen in the event of a stalemate. If you can’t agree on the terms of a buyout while you’re still friends, how can you hope to do so when the relationship has soured?

2. Ignoring signs of trouble

Failures of judgment at the top have killed more small businesses than lack of money, talent and information combined. As entrepreneurs we’re often influenced by our sentiments to act in ways that actually put our businesses at risk.  It’s absolutely essential to put aside regular time to step back, take a good cold look at what is going on and check whether it still adds up. When you do that, you need to trust the numbers: don’t let your attachment to the business blind you to warning signs of trouble.

3. No back-up plan

Of course you believe your business will succeed, or you wouldn’t be doing it. But failing to put a backup plan in place is suicidal. What if your product takes twice as long to develop as you thought, or customers buy only half as much?  It often takes twice as much time or three times as much money to get going as you predict.

4. Excess cash

Oddly enough, too much money can be as much of a curse as too little. It can tempt you to hire people you don’t need, approach problems in ways that don’t focus on the value to your customer, take your eye off the market and weave dangerous inefficiencies into your business. Don’t ever get too comfortable.

5. Accountability

I love working in flat organisations without lots of structure and hierarchy – it’s one of the reasons I started Netcash. But it would be naïve to think we could survive without some structures and channels for making decisions.  When people start looking for direction, they need to know where it’s coming from.

- A commentary by Rob Wilkie, CFO Softline and Sage AAMEA

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Sage Business Index polls over 10,000 businesses (across Europe, North America, South Africa and Asia) in order to measure the changing mood of business. In South Africa 1,000 businesses were surveyed and the responses show that both business outlook and economic confidence is still improving, albeit at a slower rate since last measured in September 2011.

This is consistent with the views we got from a few leading SA economists. According to them, our real income is growing. This means that we have dutifully been paying down our household debt (made easier with low interest rates). Our household debt to disposable income ratio has therefore fallen. In theory this means that we have more cash available to absorb price rises in food, petrol, tolls and electricity. In addition, banks are once again lending and households are taking on more credit. Not only are we absorbing price increases but we are also buying more with buoyancy recently reported in both retail and the consumer goods sector.

In short, there appears to be some cyclical buoyancy. The next 6 months will hopefully give us a clearer view of its sustainability.  Keep an eye out for price inflation – if it starts to rise faster than disposable income, consumer spending will decline. This is referred to as demand destroying inflation and what always follows is a drop in confidence.

…. and spare a thought for those who have not been in line for pay increases, or retirees reliant on an eroding interest income? Their real income has declined and price increases are already hurting. These households are already under a lot of pressure, a precursor perhaps for what is to come.

Scroll down for graphical analysis: South African results.

Softline, part of the Sage Group PLC, today released the results of The Sage Business Index – International and Local Business Insights. Polling over 10,000 businesses across Europe, North America, South Africa and Asia, the Index shows that while confidence in the global economic outlook continues to decline, the outlook for local market conditions and businesses is improving. In South Africa, over 1000 small and medium business decision makers were surveyed by Populus, a UK based opinion and research consultancy firm.

This year, The Sage Group PLC have created an infographic to display insights from their 2012 Business Index in a visual and interactive way. For the full infographic, detailed data, graphics and country summaries, please visit The Sage Business IndexBusiness Insights microsite.

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Key Findings from the March 2012 Business Index

Responses show that while confidence in businesses’ own prospects (business outlook) has marginally improved against the last Index, there has been a slight drop in the rate of growth, with 67 percent of businesses experiencing either neutral or positive growth, a drop of two percent on the results from the Index in September 2011. South African businesses’ growth rate also decreased by two percent from the Index in September 2011 to 67 percent. This can perhaps be explained by concerns around the rising costs of fuel and raw materials which is the number one challenge to growth. However, the improvement in both local economic confidence and business outlook suggests a more optimistic mood exists within individual companies.

Economic Confidence – global pessimism, local optimism

Interestingly, South Africans are slightly more pessimistic than their global counterparts about the outlook for the global economy with a 1.21 decrease in the Index score compared to the .52 decrease of global sample.

Ivan Epstein, CEO (and co-founder) of Softline and Sage AAMEA (Africa, Australia, Middle East and Asia) said: “It is encouraging to see that once again, businesses in South Africa are more confident about their own prospects. Companies are focussed on the day-to-day challenge of maintaining and improving their businesses, and Government should do all they can to harness and help the entrepreneurial spirit that already exists. We wait in anticipation to assess the impact of the latest fuel price increase on local sentiment when we conduct the annualised Business Index later this year.”

Business Confidence – South Africa

Business Confidence – World

March ’12 September 11
Index Scores Global SA Global SA
Global economic confidence 43.95 44.71 44.47 45.92
Country Economic Confidence 47.26 46.11 47.11 44.10
Business Outlook 58.86 64.44 57.88 62.58

(Below 50 is decline/less confident above 50 is improvement/more confident, 50 is no different)*

When looking at the data from a regional level the findings also mirror the broader economic news agenda. The UK and the US, who were the most pessimistic of the countries surveyed in September 2011 (with country index scores of 40.65 and 41.53 respectively), have both improved (44.97 and 49.28 respectively) while Euro-zone countries, Germany, Spain and France have all seen drops in confidence.  Malaysia and Singapore are still confident with a score of 51.53, but this is down from 53.26 last time.  South Africa showed increased optimism with an Index score of 46.11 up 2.01 from September 2011.

Business Performance and Challenges – revenues maintained, energy cost challenges

While local confidence is increasing and the rate of decline in global confidence slowing for the global sample, there are still a number of challenges facing businesses. Rising inflation and the increasing cost of fuel, energy and raw materials topped the list with all countries citing this as their top concern and locally 58 percent of businesses listed this among their top three concerns with 25% ranking it as their number one concern. Over a third of South African businesses see instability or uncertainty in the local economic market as a worry, and a similar proportion (34 percent) say the same of reduced cash flow in the supply chain.

Adds Epstein: “The Index is a vital tool for Softline and Sage in the region to take stock of the challenges and worries affecting our customers. The next six months will be telling and despite the input cost challenges that SME’s face going forward; we hope that the results indicate the first green shoots of recovery in South Africa with overall business outlook continuing to improve. As an indicator for the rest of 2012, three quarters of our respondents said that customer service has become even more important to their operations over the past year, which will guide how we will approach our business in the next six months.”

Revenue – World

Revenue – SA

About Softline

Softline is a leading provider of business software and related services. Founded in 1988 by Ivan Epstein, Alan Osrin and Steven Cohen, Softline was established during the formative years of the business software industry. Whilst Softline’s heritage is in the SME market the group also offers expertise and solutions that meet the needs of specific industries and larger organisations. In 2003 Softline was acquired by The Sage Group plc, a FTSE 100 company. Softline has a solid track record offering customers local expertise backed by the global Sage brand. The group delivers quality software solutions to make customers’ business lives easier.

About Sage

The Sage Group plc is a leading global supplier of business management software and related products and services, principally for small to medium-sized enterprises. Formed in 1981, Sage was floated on the London Stock Exchange in 1989. Sage has 6 million customers and more than 12,300 employees worldwide. We operate in over 23 countries covering the UK, mainland Europe, North America, South Africa, Australia and India. For further information please visit www.sage.com.

About The Sage Business Index

The Sage Business Index polled 10,009 small and medium-sized businesses across 10 countries – US, Canada, Germany, Austria France, UK, Spain, South Africa, Malaysia and Singapore over a two week period in March 2012.  Businesses were asked a range of questions regarding such issues as business confidence and outlook, how they feel about the global and local economies and what challenges they currently face.

For the full report inforgraphic, detailed data, graphics and country summaries, as well as to read to see the full results of the first and second Business Indices, please visit The Sage Business Index – Business Insights.

Survey Methodology

Populus provided online interviews with 10,009 decision makers in businesses in the UK, USA, Canada, German, France, Spain, South Africa, Malaysia, Singapore, Austria.  The businesses were drawn from two sources:

  • 8,575 respondents were drawn from Sage’s local customer databases across the UK, USA, Canada, Germany, France, Spain, South Africa, Malaysia, Singapore and Austria.  Sage’s local operating companies sent an email invitation to participate to specially selected databases with a survey link provided by Populus.  In Malaysia and Singapore, customers were invited to participate via a letter which included the details of how to enter online.  All responses were collected centrally by Populus.
  • 1,434 respondents were drawn from a dedicated online panel of business people, which has 2.4 million members worldwide.  200 interviews were conducted in all markets apart from Austria, Malaysia and Singapore where research was undertaken via Sage local operating companies, as above.  A random sample of respondents whose profiles met the client criteria were invited to take part in the survey, ensuring a spread of business sizes and industries.  Respondents were then asked a screener question to ensure that they were a decision maker at their business.

*Index Methodology

As this is the third Sage Business Index, we have applied an index methodology which allows us to measure the changing mood of the businesses surveyed in relation to business and economic confidence.  The index is based on a scale of one to 100 where 0 means a significant decline, 100 means a significant improvement, and 50 means it is no different. For the business confidence question the scale translates to below 50 as less confident and over 50 is more confident, 50 is no different.

We retrospectively applied this index methodology to the countries that took place in the first business survey in February 2011 (US, Canada, UK, Germany and France) where the questions were asked as follows:

  • “Do you feel your country’s economy is recovering or declining?” and “Do you feel the global economy is recovering or declining?” Index scores have been derived from this data where answer options in this study, and their index score weighting, were: “It is recovering significantly (100)”, “It is recovering slightly (75)”, “It is no different (50)”, “It is declining slightly (25)”, “It is declining significantly (0)”
  •  “Are you more or less confident of your business prospects over the next year?” Index scores have been derived from this data where answer options in this study, and their index score weighting, were: “More confident (75)”, “No different (50)” and “Less confident (25)”

About Populus

Populus is an opinion research and consultancy firm that specialises in understanding the views of the general public, customers, businesses and key stakeholders.  Best known for its social and political research as pollsters to media organisations such as The Times, the BBC and ITV News, it conducts large, regular, research programmes for a wide variety of clients, such as large multinational companies in retailing, food manufacturing, pharmaceutical, financial services and communications sectors, to public institutions, membership organisations and NGOs.

  • Populus has significant experience in:
  • one-to-one depth interviews with senior decision-makers and stakeholders (e.g. Members of Parliament, senior business executives, investors and analysts, specialist journalists, government advisers and civil servants, members of EU institutions, and leaders of NGOs and trade associations);
  • constructing bespoke online panels for clients wishing to engage with their stakeholders, memberships, or consumers on a continuing basis;
  • employing call-centre based or access panel research both nationally and internationally for polling Business to Business groups, the general population and specific sub-samples of the public;
  • organising focus groups – including among hard-to-reach groups – to gain greater understanding of what drives opinion and motivates key audiences or to test messaging concepts and to use stimulus material.

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