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Survey reveals private sector "uncertain" about future

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Sixty seven percent of South African privately held businesses are putting off
investment decisions owing to uncertainty about the future political direction of the
country. A further 48% are looking at investing offshore rather than in SA while 27%
are contemplating selling their businesses and 14% are seriously considering
emigrating.

The Grant Thornton International Business Report (IBR) quarterly research data
for the second quarter of 2013 to June reveals a drastic increase in uncertainty
which is directly impacting business decisions and overall confidence of South African
privately owned business executives.

"There is no doubt that businesses are waiting for next year’s elections hopefully
to bring stability and clarity on the future direction of our country,' says Deepak
Nagar, national chairman of Grant Thornton SA. "This is possibly one of the core
reasons for delays in private business investment decisions which we are observing in
our IBR results each quarter.'

The Grant Thornton data also revealed that 57% of business executives are
being negatively impacted by poor government service delivery. The striking
feedback in this set of data for the second quarter of 2013 is in relation to business
executives’ responses to the specific service delivery issues. These statistics more
than doubled and sometimes even trebled since Q1 just three months earlier.

When businesses were asked in what ways had they been negatively affected by
poor government service delivery a massive 81% of respondents stated utilities as a
core issue, such as water and electricity supply (Q1: 2013 - 41%), while 69% said
road concerns including potholes and traffic light issues (this response trebled since
Q1:2013 - 21%) and 58% lamented billing issues (up from 23% in Q1 this year).

An additional 36% of respondents stated being impacted by a combination of red
tape, transport inefficiencies, labour strikes, poor payment from government and
tender fraud, quoted as core issues in the "other' category.

"The economic slowdown is still extremely burdensome on the South African economy
and additional local pressures are not helping at all,' says Nagar. "The battling BRIC
region continues to directly impact business expansion for South African privately
held businesses while local service delivery concerns and political uncertainty
persistently lash organisational growth.'

Grant Thornton’s quarterly International Business Report (IBR) research data for
the second quarter of 2013 provides tracker insights into the views and expectations
of over 12 500 privately held businesses surveyed in total per year across 44
economies. The Q2 data for IBR to June 2013 also highlights regional and national
perceptions of privately held businesses regarding crime, service delivery and political
climate for South African business owners.

Crime and security

Regrettably, the impact of crime on SA businesses continues to be on the
increase, with 61% of business executives, their staff or family of staff directly
affected through a contact crime incident in the past 12 months. Contact crime is
defined in the research as housebreaking, violent crime, road rage or hijacking.

This figure has increased 15 basis points since 2011(46%) with KwaZulu-Natal
and Western Cape regions recording the highest impact at 65% and 62%
respectively.

"It is a serious concern to see the figures rising so rapidly. We can no longer ignore
this blight - something just has to be done. Not tomorrow, not next week - right
now,' says Nagar.

In terms of the financial burden that crime has on SA businesses, the IBR data
for Q2 2013 highlighted that a startling 72% of business leaders who stated crime as
a real concern in the past year reported that they had experienced increased costs
for security systems in their organisations.

"It’s hard to understand how security costs for businesses just never seem to
stabilise. Investing in securing your premises and protecting your staff is a massive
cost outlay for South African companies and it is a sad state of affairs that crime is
so financially burdensome,' continues Nagar.

When asked if any executives had given serious consideration to emigrating, only
19% stated that they were considering it (2009: 30%). In addition, when privately
held business owners were asked to provide reasons why they were considering
emigrating, 84% said it was the high crime rate, 83% responded stating that the
political climate was prompting them to consider emigrating and 58% said racial
discrimination, with 54% commenting on the poor quality of education and
healthcare.

SA’s euphoric disposition shines on

Despite all the doom and gloom, business owners in South Africa still have a
euphoric future outlook and continue to express positivity about the next 12 months
with 45% of executives surveyed stating that they are optimistic about business
prospects for the next 12 months.

Globally, optimism data reveals a dramatic reversal of fortune for business leaders in
the world’s two largest economies - the US and the UK.

The IBR reveals that US business optimism climbed to 55% in Q2 up from 31% in
Q1 which is the highest level recorded since 2005. Optimism in the UK broke through
from -1% in Q1 to +34% in Q2 revealing a dramatic improvement in sentiment overall,
in terms of future business growth prospects.

However, while US businesses are feeling more confident about growth in their
operations and the economy, optimism amongst peers in China dropped to 4% from
25% in Q1 which is China’s lowest level since 2006. The BRIC region of economies
also saw a dramatic decline in business optimism, recording optimism down to 23% in
Q2, from 48% in Q1 - there’s no doubt that the China data had a massive impact
here.

Data for this report was drawn from interviews conducted in May
2013 and the total sample size is 600. The target respondents are chief executive
officers, managing directors, chairmen or other senior executives.

Details

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