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The last eight weeks in the South African economy can at best, be likened to a long, torrid road trip. Two too many passengers, a petrol card that isn’t likely to get through the whole trip, and a set of drivers who have a map but were not warned of the road conditions, who know how to get there but had no idea the detours were so long and in spite of every outburst, tyre burst, stoppage and storm cloud must keep driving!An accumulation of 11 simultaneous strikes in key sectors of the economy, a slowdown in growth and productivity, unprecedented sectoral financial losses on the back of strikes, unrelenting labour negotiations, protracted responses from government on interventions to resolve the status quo, has left the generally resilient South African business community with deflated outlooks and confidence in the overall business environment and its short to medium term prospects.
Grappling with the increased inflation and CPI rates, labour market constraints, oil prices and a currency heavily swayed by the fortunes of events and movements in foreign markets and the gold sector locally, local business has had much to adjust to in the last two quarters.
As the business year winds to a close and the prospects and anticipation of an election year in South Africa begin to move into macroeconomic focus, business is bracing itself for forthcoming changes in the labour and empowerment policy of the country too and what this will mean within the governance structures of affected entities.
GDP growth forecasts for the current fiscal year have been placed at two per cent, against the tide of massive pressure to create meaningful employment for South Africa’s 4.7 million, particularly its young and unemployed.
The proposals of the NDP (National Development Plan) should prioritise development, innovation and ensure South Africa’s global competitiveness.
There is a lot on the mind of the average South African business leader outside of the daily operations of his/her business. As the market moves from one scenario to the unexpected and often costly next – we are all left looking for an end to an uncertain, tumultuous period in the economy and wait in anticipation for the answer to “Are we there yet?”
Will we get there?
In this week, we are due to enter the final quarter of the year.
Coming out of the third quarter of 2013, we have seen two key, separate business confidence reports indicate that South African business confidence has decreased to a 10 year low.
Labour, investor movement and accelerating inflation have all seen business respondents indicating their displeasure with the current market environment. Certain industries, chief among them the automotive and mining industries are not due to catch up on lost output due to labour unrest until early 2014.
Market conditions in South Africa are not unusual when one looks at activity and indices in global markets. Key however to restoring business and consumer confidence to improved levels will be the following:
Strong, clear and focused government directives on recovery and policy
The South African government’s communication on policy directives related to labour law amendments and BBBEE (Broad-Based Black Economic Empowerment) act amendments will be pivotal to the sentiment, strategy and recovery in the next quarter. The two areas of governance have a significant influence on productivity, investment and procurement in the market and changes to the detriment of business will have downstream impact on employment, inflation and consumer activity in the market.
Incentives for local investment and productivity
A further area that public policy regulators can play a decisive role in business confidence lies in the area of incentives for investment and productivity. A broader, intense focus will now be placed on interest rates and any changes the Reserve Bank may propose, fuel prices, tax law amendments to incentivise investment and local productivity before the new tax year ends and tariffs on various activities, including import and export, manufacturing quotas and even e-tolls.
Long term, sustainable commitments with key industry labour movements on strikes
The agreements and settlements being made by various industries to bring an end to the current strikes will be key determinants of stability of growth, employment figures and market activity. If the agreements are short term, these will come to affect a long term, stable approach to restored confidence.
Improved dialogue and collaboration with business in the run up to Elections in 2014
Business confidence in South Africa is heavily driven by business sentiment on whether they are viewed as contributors and partners to the continued success of South Africa. Business in South Africa is also heavily sensitive to surprises and non consultation.
As we run up to the 20th year of democracy, confidence will no doubt be restored by a measure that demonstrates the contribution of business to the development of the country. This will also present a fresh opportunity for a call to business to innovate, and play its part in the next phase of development geared at growth.
“Will we get there?” is the current refrain. I, for one, remain optimistic that this is yet another test of not just the economy’s but the country’s resilience and with time, commitment and incentives for growth, we can.
In the meantime, business and our confidence in it is not so much a destination, as it is a journey. Fortune will favour those brave enough to weather the rest of this trip.
Lynette Ntuli is on Twitter: @MsNtuli