The Interpreneur survey: Understanding mid-market business trends in South Africa

While South Africa’s unique challenges demand that businesses prioritise local survival through collaboration and market focus, our recent study reveals that its CEOs are increasingly eyeing international investments, offering insight into their strategic outlook.

To understand how this landscape is affecting mid-market businesses, we recently surveyed 1,400 C-suite business leaders in 14 countries, in private sector companies earning up to £300m a year that have expanded internationally. We call these CEOs ‘interpreneurs’.

We have analysed the South African data to better understand what drives South African business owners when expanding abroad.

Global business trends: Do South African business leaders believe more business will expand overseas in the next 12 months?

98% of respondents said they expect an increase in businesses expanding overseas in the next 12 months, making South Africa one of the most optimistic countries in the world that global expansion is on the rise.

Which markets do South African businesses prefer to expand into?

Africa number one choice for South African interpreneurs when expanding businesses globally

Africa is the top choice for business expansion among South African companies, with 50% of respondents choosing it. This is interesting because Africa is one of the least popular regions for global expansion, likely due to its unique financial challenges. Despite this, South African businesses see great opportunities in Africa.

Western Europe is the second most popular choice for South African companies, with 47% of respondents selecting it. North America follows closely, chosen by 43%. These regions are highly favoured for global expansion, which explains why they are also top choices for South African businesses. This shows that South African companies are willing to expand their operations worldwide, demonstrating their global ambitions.

What makes a country more attractive to South African businesses looking to expand globally?

Economic growth prospects primary attractor to South African business leaders

Globally, businesses prioritise future economic growth prospects as their primary motivator for expansion. Notably, South African respondents place the highest value on these growth prospects compared to other countries while deeming a similar culture and language the least important factor. This highlights a strategic focus on potential market growth over cultural familiarity.

67% of South African respondents cited market growth opportunities as their primary motivation for international expansion. This is one of the highest rates globally, with only Brazil surpassing it at 70%. In contrast, South African business leaders showed the least interest in cost optimisation, such as leveraging lower production and resource costs. This indicates that South African businesses are more focused on tapping into new markets and customer bases rather than reducing expenses, reflecting a strategic emphasis on long-term growth and expansion over short-term cost savings.

What motivates South African interpreneurs to expand internationally?

Despite the unique challenges in their financial markets, South African businesses are still considering achieving higher profits through international expansion. In fact, 65% of respondents identified increased sales and revenue as one of the biggest benefits of expanding abroad, a sentiment echoed in global findings.

As a business leader and Entrepreneur myself, I am inspired by the strategic vision and optimism of my fellow South African business leaders, as highlighted in our recent Entrepreneur survey. This survey, which serves as a crucial benchmark, reveals that an impressive 98% of our peers anticipate increased overseas expansion next year, underscoring a robust confidence in global growth opportunities.

South African companies, like ours, are primarily focused on Africa, Western Europe, and North America, driven by the pursuit of market growth rather than short-term cost savings. This forward-thinking approach underscores the importance of harnessing future economic prospects. However, we all recognize that navigating economic volatility and establishing reliable local partnerships are significant challenges that we must collectively address.

As we stand in solidarity with our clients in these ventures, it becomes imperative to place the development of comprehensive risk management strategies and the fostering of international solid networks at the forefront. This strategic approach, when adopted by South African businesses, not only mitigates risks but also paves the way for them to seize their global ambitions. In doing so, they propel sustainable growth and innovation, making a significant impact on the ever-evolving economic landscape.

Heinrich Moller
Managing Partner
Kreston Pretoria

What are the biggest international expansion challenges in 2024 according to South African interpreneurs?

Managing economic volatility biggest challenge to doing business internationally say South African CEOs

Just under half of South African respondents (47%) identified managing economic volatility, such as currency fluctuations, inflation, and low growth, as one of the biggest challenges during international expansion. This highlights the critical importance of implementing robust risk management strategies to effectively navigate uncertain global economic conditions.

Risk: What do South Africa CEOs think are the biggest risks to global business expansion in 2024?

How much of a risk do the following pose to your business’s international expansion or planned international expansion?

Economic slowdown a concern for South African business leaders

51% of respondents felt that economic slowdown or recession poses a disruptive or significant risk to their business’s international or planned expansion.

37% felt that escalating geopolitical tensions and instability pose a disruptive or significant risk, and an additional 37% felt this risk from cybersecurity threats and data breaches.

South African business leaders show the least worry about technological disruption from AI and new technologies. This suggests that they believe in the potential of technology to address issues like corruption and inefficiencies. For example, blockchain can provide greater transaction transparency, while automation and AI can enhance operational efficiency and reduce human errors.

Private Investors v Capital Markets: hich is the preferred international expansion funding source for South African businesses?

Private investors offering South African businesses a quicker and more flexible way to fund international expansion

The majority (69%) of South African interpreneurs said that the type of growth capital their business is most likely to consider, or have used, to grow business internationally was private investors (including HNWIs).

Understanding global tax: Is the C-suite ready for a global tax threshold?

South African businesses confident in understanding global tax

97% of South African business owners were confident int their understanding of international tax rules that govern multinational businesses. They are one of the most confident, with 53% sharing they deeply understand global tax rules and their implications for multinational businesses. The only more confident countries were the US (64%) and Egypt (56%).

The growing importance of ESG for South African investors and interpreneurs

South Africa high in the field placing ESG as a priority

Almost all (99%) do/would consider ESG practices when considering countries or regions to expand into, with 54% of respondents stating that their business does or would prioritise ESG. South Africa, along with China (64%) and fellow African country Nigeria (62%), emerged as one of the leading proponents of ESG priorities.

The benefits of AI in international business operations

South African businesses confident about the use of AI in global operations

88% of respondents said they strongly or somewhat agreed that they feel prepared to harness the benefits of AI in global business operations within the next two years. 3% of respondents disagreed with the statement, indicating that there may still be some reservations or obstacles to fully adopting AI within South African business environments.