JRising costs, poor government service delivery and crime continue to weigh on the minds of South African business leaders in privately held companies, pointing to a “depressed” South African economy, Grant Thornton’s International Business Report (IBR) for the second quarter ended June 30 shows.

Some 57% of South African companies cited rising energy costs as the most impactful constraint to business growth, notwithstanding the National Energy Regulator of South Africa’s recent rejection of energy utility Eskom’s 25% price hike application.

“Increased energy costs, unreliable electricity [supply] and fears about the future sustainability of energy for business are serious concerns. In addition, the weak rand continues owing to continued weak commodity prices and ongoing negative sentiment. 

“Poor economic growth is the end result and this is causing stagflation – a combination of low economic growth with inflation,” commented Grant Thornton Cape CEO Ian Scott.

The second-quarter data further showed that 45% of polled business executives remained concerned about economic uncertainty, while 41% were constrained by exchange rate fluctuations, 39% by overregulation and 36% by a lack of availability of a skilled workforce.

“In fact, rising energy costs, our exchange rate concerns and many other factors highlighted by business executives are probably the direct cause of our economic uncertainty in the country – it’s a real and true domino effect that’s hurting our privately held business executives,” he noted.

Crime was also impacting on the productivity of businesses, the second-quarter data revealed, with a hefty 65% of those surveyed indicating that they themselves, staff members or family of their staff members had been affected by a threat to personal security such as housebreaking, hijacking, violent crime or road rage in the last 12 months.

“Crime has affected our business environment and the foreign investment we should be attracting, for far too long,” Scott averred, adding that 82% of businesses stated that the increased costs for security were a “serious” financial burden.

Poor government service delivery also continued to impact on growth in the second quarter, impacting negatively on the businesses of 71% of those surveyed – an increase from 62% in the second quarter of the prior year.

Some 87% of local businesses said they were “seriously” affected by the poor delivery of basic utility services, such as water and electricity.

In addition, road infrastructure concerns, such as potholes and traffic light issues, affected 59% of those surveyed – an improvement on the second quarter of 2014, when 65% indicated that this hampered business growth.

“It’s encouraging to see that road infrastructure concerns and billing issues are declining as factors impacting local businesses. I hope this is an indication that local municipalities are overcoming some of the problems here and that visible improvements are ongoing,” he commented.

Citing positive trends, Scott said the IBR found that business executives continued to fight corruption through the implementation of appropriate risk management procedures. 

When asked how their businesses had responded to the threat of corruption, 81% of executives polled indicated that they had implemented risk management strategies, while 66% stated that they had increased transparency and 63% had introduced formalised procurement policies.

An additional 54% of those polled had introduced “active and responsive” anticorruption policies, while 51% had strengthened their audit practices.

“These anticorruption measures are outstanding. South Africans are renowned for being very compliant and it is encouraging to see active business participation in new procedures which will dramatically assist in the prevention of corruption in the years ahead,” he held.