South Africa

Details

  • Service: Advisory, Risk & Compliance, Financial Risk Management
  • Type: Survey report
  • Date: 2012/06/12

KPMG Survey: Organisations altering business models to take advantage of changing market conditions 

Businesses need to adapt swiftly to take advantage of changing market conditions. Business leaders are looking to emerging markets for growth.

A survey of leading executives across Europe and the Middle East has shown that businesses are continuing to cut costs and focus on efficiencies – in the face of persistent uncertainty over the global economy and the future of the Eurozone


KPMG’s Business Leaders Survey polled almost 3 000 senior executives across 31 countries.

 

The survey revealed that the top five issues for the businesses surveyed are:

 

  • Changing business operations to realise cost efficiencies (43 percent)
  • Improving cash and working capital management (32 percent)
  • Exploiting growth opportunities through successful transactions (30 percent)
  • Preparing the organisation for major business model changes (25 percent)
  • Managing, developing and retaining the right people within the organisation (24 percent)

 

“The major challenges faced by businesses on a global level in 2012 mirror those experienced in 2011, with the exception of addressing business risk. In South Africa, the challenges that businesses face in attempting to respond to the sustained impacts of the global economic crisis do not differ that much from those faced by businesses in more developed markets”, says David Friedland, Director at KPMG.


The top four challenges experienced in South Africa, as identified through this survey, include:

 

  • Exploiting growth opportunities through transactions
  • Looking for growth in emerging markets
  • Altering business models to realise cost efficiencies, and
  • Embedding an element of sustainability in business models

 

Frank Blackmore, Senior Economist at KPMG says, “While South Africa managed to achieve an average growth rate of over 5 percent between 2004 and 2007, it failed to reap the benefits of a global commodity boom driven by rising demand from Asia and resulting in a “golden era” for the metals and mining industry. This was mainly due to domestic infrastructural constraints.  Economic growth in South Africa slowed to around 2 percent in real terms between 2008 and 2010 – in line with the slump in global demand. This slowdown was on the back of constrained international demand and lower commodity prices as a result of the global financial crisis. Business’ subsequent reaction to the emergence of the recession was – predictably – to focus on the careful management of cash and costs. This area has remained important to business in 2011.”

 

Friedland adds that with the Eurozone being South Africa's largest trading partner, the prevailing Sovereign Debt has reduced demand for South Africa's goods. “This substantiates the shift in focus, for South African businesses, towards creating sustainable and adaptable business models to react to the current market conditions. Although another global recession seems unlikely at this point, Europe’s current financial crisis will continue to adversely affect world economic growth – particularly in emerging market economies such as South Africa.”, says Friedman.

 

The current situation has, to some extent, driven away potential and existing investors from perceived riskier emerging market assets. “However, forecasts by the International Monetary Fund* indicate that emerging market economies will outperform developed economies in the medium term as lower interest rates will favour investment in these regions. Considering the potential areas for investment, which emerging economies present, it comes as no surprise that 30 percent of the Business Leaders survey respondents suggest shifting their focus to investment in emerging markets.”, adds Friedman.

 

“South Africa’s standing as an emerging economy, coupled with an abundant supply of natural resources and well developed financial, communications, energy and transport sectors provides a stable platform for future economic growth. The country’s inclusion in the BRIC (Brazil, Russia, India and China) economies substantiates its growth potential and further increases its  reputation as a globally competitive destination for foreign investment.”, concludes Blackmore.

 

* World Economic Outlook, International Monetary Fund, Table A16 Summary of World Medium-Term Baseline Scenario (page 220)

 

KPMG’s Business Leaders Survey

 

This is the third 'Business Leaders' survey conducted by KPMG. Conducted online between 9th – 26th January, it is based on the views of respondents from 31 countries.  Designed to identify where executives are focusing today and what the most important topics for their organisations are, the survey is carried out regularly in order to monitor trends and identify how business needs are evolving in the current environment.

 

For more information on this survey, please visit http://www.kpmg.com/eu/en/succeeding/survey-business-leaders-agenda/pages/default.aspx

 

About KPMG International

 

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 153 countries and have 145 000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.