Graft topples nationalisation
SA's top executives have sleepless nights over corruption, latest Deloitte survey reveals
The threat of nationalisation as a political concern has decreased substantially, according to the purse-bearers of South African companies.
Deloitte published the results of its latest chief financial officer (CFO) survey, conducted in January and February, this week. The results showed only 9% of CFOs saw nationalisation as their top political concern, compared with 20% in the middle of last year, when the previous survey was done.
Overall, 21% of respondents listed nationalisation as one of their top three political concerns, compared to 31% last year.
Corruption and its effect on doing business remains the biggest political concern among CFOs, with 45% listing it as one of their top three concerns. This was followed by the effect of the government's spending priorities at 39% and the relationship and policy dialogue between the government and business at 29%.
The level and nature of this dialogue was most recently questioned after Nedbank chairman Reuel Khoza criticised political leadership in the banking group's annual report and some government representatives reacted with personal attacks on Khoza.
Deloitte said speculation and uncertainty over the ANC's elective conference outcomes later this year may be exacerbating the concerns of CFOs who took part in the survey.
Political instability was listed as the fourth-biggest business risk, with 33% of respondents saying it was a significant risk. Only 14% listed the threat of nationalisation as a significant business risk.
The biggest business risk, according to the survey, is the fragile state of the global economic recovery as 64% of respondents saw this as a significant risk.
Rodger George, lead survey consulting director at Deloitte, said although the South African economy has recovered from the 2009 downturn, businesses are anxious that a second recessionary wave would eliminate recent gains and plunge the country back into a recession.
"Having survived one crisis, the potential [of businesses] to survive a second is enfeebled," George said.
The IMF this week raised its forecast for South Africa's economic growth this year marginally to 2.7% after last year's 3.1% growth.
It warned that South Africa's economy will continue to stumble due to its deep ties to crisis-ridden Europe. The euro zone is expected to go through a mild recession this year, with the region's economy shrinking by 0.3%.
George said it is clear that Europe is still affecting the mindset of South African CFOs.
"Europe is our biggest export partner, but if you look at the five countries that are really affected, Portugal, Italy, Ireland, Greece and Spain, only 5% of our trade actually goes to those five countries," George said.
"The facts of our real exposure have been overshadowed by our fears of what might and might not happen."
Robert Quinn, chief European equity strategist at S&P Capital IQ, said this week there is a lot of focus on Europe, but the region's effect is overestimated.
"There is still a business cycle to be had [globally] despite the fact that Europe has been making a lot of headlines," Quinn said.
The global uncertainty had led to CFOs still following defensive rather than expansionary strategies when making big decisions, and opting for survival rather than growth, George said.
The survey showed 57% of respondents said retaining cash for liquidity is one of their top three cash flow priorities. About 55% listed investment in new capacity as one of their top three priorities and 36% said investment in new businesses is one of their top three cash flow priorities.
Grant Krog, lead survey assurance partner at Deloitte, said it is clear that business is putting the brakes on.
"Due to the emphasis on liquidity, research and development have suffered severely, raising the danger that companies are not investing sufficiently for the future," Krog said.