All economists will tell you that they are not clairvoyant. They do not have a crystal ball and their expectations of the future are based on statistical analysis.
Throw a couple of unexpected elements into the mix and forecasting immediately becomes problematic.
This is the problem when it comes to predicting what will happen to the economy next year, says Economists.co.za's Mike Schüssler.
The biggest unknown is the one with the largest potential negative influence over the economy: Eskom's proposed 45% tariff hike each year for three years.
The Eskom Mystery
If, he explains, the National Energy Regulator of South Africa approves this tariff increase in February next year, there will be wide-ranging consequences.
The first of these is a decrease in disposable consumer income. Then, as more expensive electricity works its way through the economy, inflation will increase, leading to interest rate increases of anywhere between 1% and 2%.
This in turn puts households under more pressure, leading to less consumer spending.
The effects of consumer spending on SMEs are evident if one considers that 34% of small enterprises are dependent on this market segment, according to the SME survey.
Electricity price increases will also affect SMEs' operating expenses, placing further strain on cash flow.
Glass half full
Despite the uncertainties surrounding 2010, Mike is somewhat optimistic about the macroeconomic forecast.
Most economists expect a gradual recovery but warn that there might be a hiccup or two later in the year.
Economic growth will come back but the electricity shock will probably come through more strongly in the third quarter. "I initially expected growth of about 1.5% but now it may be only 1%," he says.
"We will not be in a position where we are doing better. Rather, we will be in a position where we are starting to do better," he says, emphasising the fact that one must remember that most industries are coming off an extremely low base.
Stanlib economist Kevin Lings points out that most of the recent international economic data indicates that the downturn has most probably bottomed out.
He says that recent data from the United States shows that this powerhouse is recovering, and adds that global manufacturing has turned the corner.
It is also worth noting that South Africa takes about three to four months to react to global trends, so our recovery will come after a worldwide upturn.
"We are nowhere close to normal but it seems the worst is over. It is going to take a long time to recover, but the numbers look better."
Mike believes that the world's economic growth will stay muted for the next two or three years, so it will take some time to see significant growth on local soil.
Rode & Associates CEO Erwin Rode echoes these sentiments, saying that a conservative approach to 2010 is probably the best advice for SME decision-makers.
"For planning purposes, I would rather be a pessimist than an optimist. Don't expose yourself to great risks," he says.
Winners and Losers
Mike says that some SMEs will fare better than others and general dealers, pharmaceutical and cosmetic retailers and manufacturers, fast food proprietors and used car dealership should do better in 2010.
But, SME decision-makers should not expect to achieve the volumes or sales experienced in 2008 as the era of credit card-fuelled shopping sprees are over.
Mining in turn, has already started recovering as commodity prices increase and SME service providers to the sector should experience a fairly positive year.
Kevin believes that local businesses focusing on Southern Africa, and Africa in general, can expect a good year as the opportunities available are still plenty.
"Sub-Saharan Africa's performance rivals that of Southeast Asia and Brazil. The crisis is noise and I know it is difficult as a small business during a recession, but there is opportunity in Africa's emerging markets," he says.
On the other side of the spectrum, jewellery stores, restaurants, hardware retailers and furniture stockists, as well as the tourism sector after the World Cup, can expect a tough year.
New vehicle sales can expect a pretty bad year as well while the residential housing and construction markets will take a while to recover.
Nevertheless, Mike is fairly optimistic about the prospects for SMEs, saying because of their lean and streamlined nature, they will be able to take up opportunities presented in 2010 much quicker than their large counterparts.
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