The time has come for South Africa's executives to make bold plays to achieve the top-line growth they have identified as a core success criterion in 2012, says Lwazi Bam, CEO-elect of Deloitte Southern Africa.
Bam was commenting on the issues emerging from the Deloitte Insomnia Index, which captures the current “what-keeps-me-awake-at-night” concerns from a cross-section of business leaders. The Insomnia Index is produced using an interactive electronic survey tool, which records the perceived opportunities and challenges experienced by business executives at any particular time.
The tool keeps pace with the requirement of business leaders for up-to-date insights by delivering timely results.
Bam says the Insomnia Index reveals that executives are tossing and turning over challenges such as regulation, corruption, nationalisation and exchange rate volatility. However, the index which saw executives engage directly with Deloitte also shows that the perceived opportunities in 2012 are all clustered around a drive for top-line growth.
The findings show that business appears to be relying less on defensive strategies such as cost reduction, and are instead pursuing growth as a general driver. Furthermore, executives are focusing on African expansion, innovation, mergers and acquisition and new technology to energise their growth paths.
The focus on top line growth is good news for the economy overall.
“Those that succeed in growing their top lines are also the businesses most likely to generate new job opportunities,” says Bam.
He points out that achieving growth in current conditions may be one strategy, but growing beyond current operations is another strategy altogether.
“This will require leaders to actively and aggressively seek out pockets of growth both locally and internationally, and means that the time has come to make bold plays,” states Bam.
The key decision for many leaders is where to find growth. Bam says some will seek the comfort of familiar areas that offer quick returns. Others will turn to new products, technologies, services or markets, which could take time to cultivate and nurture.
In its assessment of the C-suite issues emerging from the Insomnia Index, Deloitte argues for a portfolio approach to growth strategy. “With current economic conditions being an ongoing consideration for leaders, it is pivotal to manage both increased operational efficiencies that are critical to the incremental improvement of margins, while also pursing the 'big fish' in order to deliver on shareholders' expectations,” says the Deloitte report on the Insomnia Index.
While expansion into Africa offers great opportunity, Deloitte warns there are also significant hurdles. “The degree and nature of these hurdles vary substantially from one African country to another and a well-crafted strategy is required to ensure the risks taken are calculated.”
In particular, the Deloitte report advises business leaders to consider their strategy for dealing with possible double tax agreements, withholding taxes and transfer pricing rules. On the regulatory front, careful consideration needs to be taken of the nature and extent of local restrictions on business operations.
For business leaders that look to mergers and acquisitions to fuel Africa expansion, Deloitte says there are key risks and challenges that require some form of mitigation. The risks related to gaining market access begin with valuation gaps caused by market valuations potentially using different methodologies. Once into the deal-making process, leaders should expect to encounter due diligence complexity complicated by the role of governments and regulatory differences across the spectrum.
Finally, businesses must be prepared to align themselves with regulatory demands following a successful deal. Shifts in business strategy may also be necessary to fit in with local consumer preferences.
Notes to editors:
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