South African companies are in deep trouble as their net profits and dividend payouts declined sharply through the first three quarters of 2023 compared to their performance in 2022.
This was revealed by PwC in its South African Economic Outlook for 2024, where the firm outlined the major challenges facing local businesses.
Among these challenges is global economic volatility due to heightened geopolitical tension, compounded locally by a stagnant economy, high unemployment, and deteriorating public services.
These challenges have put South African companies under immense strain and are impacting their bottom line as profits and dividend payouts declined significantly in 2023.
Data from Stats SA shows that total company income across industries increased 4.8% y-o-y in Q3 2023 to R3.6 trillion.
However, profits and dividends declined significantly, with net profit before taxation declining 17.8% y-o-y in Q3 2023 to R253.5 billion, while dividends payable dropped 33.2% y-o-y to R55.6 billion.
On average, through the first three quarters of 2023, profits of South African companies declined by over 20%, and dividend payouts declined by over 25%.
Aside from the decline in profits experienced in 2023, companies face a difficult future as conflicts in Europe and the Middle East disrupt supply chains and potentially increase inflation.
Aside from the impact of international conflict, South Africa faces domestic challenges that are set to cause continued disruption in supply chains in 2024, specifically those involving Transnet.
The S&P Global South Africa Purchasing Managers Index (PMI) November 2023 noted that supplier deliveries had slowed during the month and that supply chains were “under duress” due to severe disruption at domestic ports.
Combined with other factors, the decline in rail volumes and a slowdown in port services kept supply chain pressures above historical averages.
The country’s monthly Composite Supply Chain Pressure Index (CSCPI) was most recently calculated for November 2023, when supply chain pressure was at a similar level seen during the depths of the COVID-19 lockdowns.