Company directors are pessimistic about the economic conditions facing South Africa and are increasingly concerned over a shortage of skilled labour as well as onerous union demands.
This was one of the major findings in the latest Institute of Directors in South Africa (IoDSA) Sentiment Index, which gauges how South African directors view the current operating climate in the country.
The index polls the views of close to 500 directors mostly in an executive capacity. 59% were executive directors and 41% were non-executive directors. The survey was conducted earlier this year while South Africa was on a national adjusted level 3 lockdown.
“While directors are learning to live with the flux and mutability caused by the pandemic, most respondents still feel the uncertainty of the South African economy has impacted their business the most,” said Vikeshni Vandayar, the IoDSA’s executive of Governance and Corporate Services.
“To that end, corruption and inadequate government service delivery remain in the top-ranked challenges affecting business. Energy security is not as much of a concern as it was two years ago but still ranks highly along with inadequate government service delivery.”
In terms of the daily operating business climate, those polled believe that general business sentiment is starting to improve with brighter prospects ahead in the next year.
The most negative sentiments remain:
- The level of red tape and its impact on business;
- Poor consumer confidence;
- An overregulated environment;
- High tax levels; and
- A lack of infrastructure development.
“It’s testimony to the resilience, fortitude and application of directors in South Africa that in spite of myriad challenges, many of their businesses remain operational and robust,” Vandayar said.
The index shows that South African directors still feel positive towards current governance conditions in South Africa, however, this positive sentiment has been decreasing since the survey started in 2016.
“Directors felt the most positive about boards adequately setting the tone of ethical conduct through their ethical leadership and most negative about the implementation of good corporate governance practices improving in the next 12 months.”
“The top governance challenges are lack of sustainable thinking and a lack of understanding of the overall benefits of good governance.”
In terms of the job itself, directors are buoyed that continuous professional development is impacting positively on-board performance but there is concern over the willingness of some directors to take risks that could hinder innovation and growth.
In terms of what motivates a director’s willingness to serve on a board, the top factors are a strong adherence to ethical behaviour independence and maintaining and preserving a company’s reputation, Vandayar.