Businesses concerned as fragile economy shows fresh signs of weakness

2014-06-06 00:00

SOUTH Africa’s fragile economy is showing fresh signs of weakness — business confidence plunged to 88,9 in May, falling 3,7 points to below 90 for the first time since April 2000.

Businesses are concerned about weak growth in SA, a survey showed yesterday. Recent GDP data showed the economy contracted in the first quarter after the economy was hit by weak mining output and declining manufacturing activity,

Some economists, such as Mike Schussler of Economists.co.za, believe the country is already in recession as the second quarter GDP is likely to contract further, putting it into technical recession.

This is because the second quarter had one holiday more than normal; the platinum strike is still in full swing; while the small interest rate increase is starting to impact on consumers.

On the other hand, and more positively, a leading executive search firm says executives remain confident about the business environment, despite all the recent bad news.

The South African Chamber of Commerce and Industry (Sacci) said of the low confidence index that some of the country’s challenges, such as low economic growth and a persistent balance of payments gap, could be addressed by policy.

“What is of greater concern are the challenges that are more complex in determining policy responses, including concerns about property rights, unemployment, income disparities and rising levels of labour protest action,” it said in a statement.

Meanwhile, managing director of Jack Hammer Executive Headhunters, Debbie Goodman-Bhyat, said trends in the executive search showed that there had been no downturn in positive economic and investment sentiment.

She said the first murmurings of economic disaster could always be gauged early on from the hundreds of conversations the sector has every week with movers and shakers in the business world.

“Thus far, there has not been a hint of the negative sentiment that preceded the 2009 global financial meltdown,” she said.

She said Jack Hammer speaks to more than 500 top executives per week. When the economy was in danger of going pear-shaped, executive candidates would either say they need to “get out” of their current company, or alternatively that they are not keen to consider new career opportunities because “things are looking shaky”.

“There has not been an inkling of these kinds of concerns so far this year,” she said.

Goodman-Bhyat said this did not negate the reality that there were job freezes and retrenchments happening at companies throughout SA.

“At this stage, the signs in our industry show that investment sentiment remains positive overall, with business confidence up post-election and stock markets generally performing well.”

“Since the beginning of the second quarter, we have seen a 20% increase in the number of searches over the same period last year. Companies have started looking around again for seasoned leaders to head up their strategic departments. And the demand is coming from all sectors, including private sector corporates, academia, foundations, and government.”

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