Why this is important to Wisconsin businesses: A recent corruption scandal has tarnished the reputation of two major consultancies, creating opportunities for smaller service providers.
South Africa remains one of the strongest economies in the African continent, with robust business and industrial activities across many sectors such as e-commerce, media and entertainment, and mining, among others, all of which are driving demand for strategic consulting services. The South African management consulting and business advisory services industries perform a pivotal role in all sectors of the South African economy, providing value-added services that seek to enhance performance and productivity. Revenues generated from business and management consultancy activities in the country, which witnessed slow growth during 2011-2016, are expected to grow at a moderate pace during the next few years, from $16.5 billion in 2018 to $20.6 billion in 2023.
The consulting industry has developed into one of the most mature sectors in the professional services industry, generating between $100 billion to $300 billion in revenue, with the precise estimate changing depending on the definitions used. At the heart of the industry stand six domains: strategy consulting, management consulting, operation consulting, financial advisory, human resources consulting and information technology consulting. When combined, these domains span services and offerings in more than 200 industry and functional areas. The majority of consultants work at large and midsize consulting firms, yet in terms of the number of consultancy enterprises, these firms typically represent no more than 15% of the total number of registered entities.
The sector is characterized by high levels of fragmentation and differentiation, with players ranging from independent sole proprietors to major multinational consulting firms. The number of consultants, business advisors and business coaches exceeds 60,000, while the annual revenue of the sector is estimated at more than $4 billion. Large firms enjoy 85% of the gross revenue, midsize firms 10%, and small firms receive approximately 5% of the total industry revenue.
A number of big firms are increasing their investments in the country. However, not all big consultancies are thriving in South Africa. Aside from their development prospects, KPMG has seen trouble after being involved in a corruption scandal involving Trillian, a consultancy run by the Gupta family, electricity supply company Eskom and President Jacob Zuma. McKinsey & Co. was were also involved in the scandal, and both consultancies have suffered hits to their reputation as a result. This creates an opportunity for small and midsize consulting firms to find success in the South African market.
There have been a number of challenges in the South African market that have impacted the consulting industry. Public service expenditures on consulting services decreased by 12.6% in real terms between 2013 and 2016. However, a number of private actors in the country continue to hire the services of consulting firms, particularly larger international firms.
The severe impact of COVID-19 on the global economy is expected to have dire repercussions for the consulting sector, and researchers are currently trying to quantify this damage. For Africa’s consulting sector, the rise and fall of the virus appears to have diminished revenues by 14%. Africa’s consulting sector makes up approximately 2% of the global consulting market, which amounted to around $2.9 billion last year. By the end of 2020, these revenues are expected to drop to $2.5 billion. The dip is comparable to larger markets such as the U.S. and the Asia-Pacific region in percentage terms. In response, organizations have taken steps to develop their advisory and implementation units, build consulting and project management teams, and developing consulting capabilities across key departments, functions and process areas.
