Business ‘must tighten belts’

2008-12-09 00:00

KwaZulu-Natal consumers and businesses alike have been urged to tighten their belts drastically in preparation for a rough festive season and new year in the face of the severe economic downturn, which has already eroded economic growth in the province.

Local economist Clive Coetzee estimates that the province’s gross regional product (GRP) during the first three quarters of this year amounted to “stagnant economic growth”.

He told The Witness that, excluding the volatile agricultural sector, the GRP probably contracted 5,66% quarter on quarter in the first three months of 2008, then grew at 2,85% in quarter two and 1,72% in quarter three.

In contrast, economic growth in the province during 2007 probably came in at a healthy five percent and the average growth rate in the province between 2001 and 2007 was 4,34%.

The writing is on the wall for two sectors that traditionally perform well over the festive season — retail and hospitality.

In addition, the manufacturing sector in the province — as well as the country — continues to shed many jobs.

It has been a volatile year due to the electricity crisis during the first quarter and the painful cumulative effects of interest rate hikes and soaring inflation.

Economists, sector analysts and other business experts have begun to urge consumers to exercise extreme caution when shopping this year in order to avoid a “financial hangover” in January.

The first half of 2009 is expected to be the most difficult period for KZN’s businesses and consumers, as provincial growth of between 0,5% and minus 0,5% is expected during the first two quarters of the year.

Businesses and consumers need to learn several key lessons from the current turmoil, Coetzee said:

“Make provisions for the downturns. Economic upswings don’t last forever. Companies need to lower their risk appetite. The world is an increasingly volatile place. Stick to your risk profile, even in the good [economic] times.”

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