Business doom and gloom should come as no surprise

08 October 2014 - 02:01 By The Times Editorial
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Business is a confidence game. Would you put your money into a venture if the environment looked risky? Even more important, would you borrow money to do so?

The SA Chamber of Commerce and Industry is worried that business confidence is at its lowest this century. And has been for a while.

Stellenbosch University's Bureau for Economic Research and Rand Merchant Bank measure business confidence once a quarter. They found a month ago that less than half of the businesses they canvassed rate prevailing economic conditions as satisfactory. This was an improvement on the second quarter, but still chilling.

Would you go all-in on a venture if more than half of businesses were pessimistic about the prospects?

The reasons for the skittishness of business people?

Low economic growth. Debt-stricken lower-middle-class, and increasingly middle-class, consumers. Steeper than usual inflation. Huge worries in the job market.

It is not easy to sell goods and services in an economy that is expanding by only 1.4% a year - the rate the International Monetary Fund now forecasts. You are not likely to trust your customers to pay you if they have defaulted on unsecured loans, face rising fuel prices and might be retrenched as companies cut costs to stay afloat.

If small business doesn't want to invest, big business certainly won't. Multinational companies build statistical models and have entire departments that assess locations such as South Africa. We are not attractive.

Our mines are increasingly seen as "orphan assets", economist Chris Hart said this week. Large manufacturers these days set up operations here only to sell into the country, not to use it as an export base. Government red tape and the unions' red T-shirts are the big obstacles, say business leaders.

What should the government do? Just start making it easier. Easier to pay bills. Easier to get plans approved. Easier to reach someone who can solve a problem. That would start inspiring some confidence.

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