An Overview on the Implementation of Economic Value Added (EVA™) Performance Measures in South Africa

Abstract

Although Economic Value Added (EVA™) might improve the measurement of organisations’ performance, it seems not to be used widely in South Africa. The need to measure financial performance and the different metrics that can be used should be investigated to establish the best measure for each sector. The purpose of the reported study was to determine the extent to which EVA™ is used by South African organisations. Furthermore, this investigation focused on methods used by these organisations to calculate EVA™ and aimed to determine the South African business sectors in which it is most likely to be implemented. A focus group discussion was conducted with financial experts, which included consultants, analysts and statisticians, to discuss EVA™ and challenges relating to its implementation. It was established that South African companies will benefit from using EVA™ in conjunction with other metrics. Management needs to understand its own organisation to be able to implement the most appropriate performance metric applicable to the organisation. It is recommended that companies do a thorough internal analysis of their organisations to assist them in making an informed decision regarding the appropriate performance metric, which includes EVA™.