Western Cape Business News

Send  Share  RSS  Twitter  19 Apr 2010

BUSINESS: State of WCape's Economy


Recent Western Cape Business News

BUSINESSES in the Western Cape appear to be more cautious around employment growth in 2010 than the rest of the country.

This was one of the key findings in Grant Thornton’s International Business Report (IBR), which was released late last month.

Grant Thornton deputy managing partner (Cape Town) Neil Miller said a balance of 23% of businesses in the Western Cape expected employment to grow this year.

This is below the national sample, in which 25% of respondents expected employment growth.

While the 2010 Western Cape sample was markedly more optimistic than 2009 (when respondents expected a contraction of 2%), Miller suggested that local respondents in the IBR survey had previously been over-optimistic.

He pointed out that actual employment contraction reported in the Western Cape in 2009 (-8%) was more severe than respondents had predicted in the 2009 survey.

In 2008 43% of local respondents in the IBR survey forecast employment growth when actual job growth was a mere 4%.

Local businesses, though, were more upbeat about revenue prospects, which rose (from a relatively positive) 52% in 2009 to 66%.

This would suggest Cape businesses are more optimistic than their counterparts in the rest of the country. The South African average rose by a more modest 8%.

Perhaps the best indicator that local job growth expectations are not over-optimistic is that profitability expectations in Western Cape businesses have risen markedly.

Around 50% of IBR respondents in the Western Cape expected profits to rise in 2010. The SA average, by comparison, jumped from 21% to 44%.

Interestingly the Western Cape’s profit expectations for 2010 is ahead of the 2008 survey, which pegged profit expectations at 44%. The SA average, however, is still below the 53% recorded in 2008.

Overall businesses in the Western Cape were considerably more optimistic about the country’s economic outlook (+70%) for 2010 than in 2009 (+33%).

One of the key findings of this year’s IBR survey was that a lack of availability of a skilled workforce had overtaken regulations (red tape) this year as the major constraint restricting business expansion in the Western Cape.

But Western Cape business were less hassled about financing constraints than their counterparts in the rest of the country.

Almost two-thirds of the local respondents were happy at the support provided by lenders of capital.

Miller said it was important to realise that the Western Cape economy – more so than other regions – was correlated to international markets.

The openness of the regional economy to foreign trade – which makes up around 30% of gross regional product – means the robustness of the global recovery is a major risk.”

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