South African businesses look overseas for expansion

 ·30 Jun 2024

South African business leaders have emerged as some of the most optimistic among their global peers about the likelihood of businesses expanding overseas, according to a new report by international accountancy network, Kreston Global.

What was found was that two-thirds (66%) of business leaders in South Africa anticipate a significant increase in businesses expanding overseas, far higher than the global average of just 42%.

This indicates that “the country’s globally-minded entrepreneurs are more bullish on future expansion than their peers in 13 other countries around the world,” said Kreston SA.

The report is based on a survey of 1,400 business leaders (C-suite executives, owners, chairs, partners, managing directors, directors or senior management) of organisations that had successfully expanded their business into international markets.

The countries included in the scope of the survey were Brazil, China, Egypt, France, Germany, India, Japan, Mexico, Nigeria, South Africa, Spain, United Arab Emirates, United Kingdom, and the United States.

In line with global averages, almost all respondents in South Africa (97%) agree that global expansion has been of benefit to their business, citing commercial growth across increased sales and revenue (65%) and profitability (61%) as the top benefits.

Of this, 69% said that their business was more likely to consider using private investors to grow internationally, as opposed to the 47% global average.

Looking ahead, 98% of South African respondents said they expect at least a moderate increase in the number of businesses expanding overseas within the next year – higher than the global average of 87%.

In terms of regions to which they would consider expanding, respondents demonstrated a preference for neighbouring markets in Africa (50%), followed by markets in Western Europe (47%), North America (43%) and North Asia (37%).

They cited favourable economic prospects (61%), availability of skills and talent (58%), and favourable trade agreements (55%) as the biggest reasons for a country or region being the most attractive for international expansion.

However, this all comes as South Africans grapple with numerous domestic economic woes.

In the fourth quarter of 2023, South Africa’s economy just managed to escape a recession, registering a growth of 0.1% after a contraction of 0.2% in the third quarter, leading to a modest annual expansion of 0.6%.

In the first quarter of 2024, GDP decreased by 0.1% in the first quarter of 2024, with manufacturing as the largest negative contributor, declining by 1.4% and pulling GDP growth down by 0.2 of a percentage point.

Real GDP has surpassed pre-Covid levels, but still trails the third quarter of 2022’s peak.

Moreover, consumers have experienced significant financial strain. The combination of rising inflation and growing unemployment rates has tightened household finances, leading to heightened economic stress.

Respondents felt that economic slowdown or recession (51%) or escalating geopolitical tensions and instability (37%) poses a disruptive or significant risk to their business’s international expansion or planned expansion.

The report highlights that despite these internal woes, many South African businesses have chosen to not retreat but rather look outwards for growth opportunities.

“This forward-thinking approach underscores the importance of harnessing future economic prospects… however, we all recognise that navigating economic volatility and establishing reliable local partnerships are significant challenges that we must collectively address,” said Möller.


Read: South Africa picks a fight with its biggest trade partner

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