by Cees Bruggemans
We may not like the notion, but ever so surely we have lost our forward momentum, to the point of becoming a becalmed ship (and in places actually going down, even if in other parts there is still some forward momentum).
We see it in our new car sales, already for the past year flirting near the zero line. We have seen in it in our SARB leading indicators (absolutely flat earth for five years now) and BER business confidence hugging just short of the 50/50 line, also for five years now, and most unusual in what is still supposed to be an upward phase of the business cycle (but this may now ere long be acknowledged as having ended – even some time ago).
The Kagiso purchasing managers index this week, for the month of April, gave a very poor signal, falling to 45 (well below the 50/50 neutral line indicating expansion). Our industry has had a poor time lately.
It is ironic that this has come on so quickly after the fortuitous events of this summer, when the oil price halved, and pump prices for petrol and diesel fell by as much as R4/l in six months. That gave a nice lift to many households and businesses. Money that could be spent elsewhere.
And then in a matter of two months most of that advantage was wiped out again as pump prices rose anew, even if the weaker Rand meant exporters were earning more Rand income.
Also, the Eskom load sheddings didn’t help, and late April has become like the late December Christmas season – heavy with holidaying, light on work. And this having an impact on production seasonality.
So some of the weakness may be statistically overstated. But I wouldn’t emphasize that too much. Cast out your nets, and see what you get. Money is tight. Being managed much more carefully. Companies tightening up their loose ends, taking out what isn’t strictly necessary, consolidating some activities.
An active army would sense a strategic retreat in places, even if the ramparts remain manned, but thinly so, more for effect, rather than really projecting expansionary intensions.
The pulling in of horns is a cautionary business, with managers feeling their way. Nobody is panicking, but you notice the culling knife more often, shearing away here and there, keeping budgets realistic, the focus on what can be achieved, while costs get more attention. What is strictly necessary? What can be shed?
In the process, people are being let go, too. The private sector has already been shedding for over a year. High-profile strikes and threatening redundancies were part of that scenery, but what we are now talking about is a more business-like trimming in response to changing business conditions rather than the disruptive consequences of major strike actions.
Such losses still may lie ahead, if more labour unrest keeps coming our way. But it is in a deeper sense that we observe businesses becoming becalmed, consolidating operations, cutting back where the business case is no longer overwhelming for hanging on to assets or people.
For the stretch may have gone out of our markets, real spending is down, competition ferocious, and the need for cost control starting to dominate rather than the expansionary thought being the guiding force.
We are holding back more naturally, marking time, asking where all this is going, while still having to protect bottom lines. Reporting responsibilities haven’t gone away. They are more intense?
Can you survive this slow period? Can you get through it, and be ready for the next upswing when it wants to show itself? That means staying in business long enough, keeping costs controlled.
And that is what seemingly more and more households and businesses are doing. It is a time to be careful. And many people increasingly are.
