Being in the know can help your business grow

It has been several weeks following the devastating social unrest in KZN and Gauteng, and from recent data releases to abrupt bureaucratic changes in public ministries, South Africa’s economic outlook is more uncertain than it has been in years. Last week, despite the civil unrest that has overwhelmed South Africa, President Cyril Ramaphosa made a bold move to reshuffle his cabinet, at last accepting Finance Minister Tito Mobweni’s resignation, and selecting Enoch Godongwana to lead in his stead. Whilst Mobewni is known to be fiscally conservative, no one knows what ideological framework his successor will lean more towards: spending more money or spending less. Prior to his appointment, Godongwana was in charge of the ANC’s economic transformation committee, as well as the former head of the Eastern Cape’s Members of Executive Council (MEC). There is no doubt that Godongwana has the experience and knowledge to be South Africa’s finance minister, but the question remains: will the power of politics play a bigger factor in his decision-making than doing what’s good for our economy and society?

The public response to this reshuffle is mixed, whilst some believe this reshuffle will only strengthen the government’s ability to assist those affected by the July riots, others maintain Ramaphosa’s new cabinet is not that much different to his prior cabinet.  More specifically, many feel our president missed an ideal opportunity to clean the slate and start afresh with new people and new ideas on how to enact positive change in South Africa. It seems, yet again, the politics associated with the ANC party got in the way of creating a better society and economy for our country. Despite the public’s mixed reaction, the cabinet reshuffle hasn’t had a devastating impact on our economy, which can be attributed to the fact that the global economy is waiting to see how our government will take charge in the following months to put South Africa back on a positive growth trajectory. This includes budgetary decisions as well as how swiftly they intend to act in developing and implementing better relief mechanisms targeted at distressed businesses and vulnerable persons in South Africa. A lot of ambiguity surrounds our country’s political landscape, but there is one certainty: to effect positive change in our country, our government needs to do more than simply shuffle around representatives already in power.

On a more positive note, the rand exchange rate was able to gain back some of its value since it had weakened considerably last week, and recently, the GBP/ZAR exchange rate has been reported to be trading on a two-week high. This bodes well for international and investor confidence going forward. Additionally, the South African government will start the rollout of the COVID-19 relief grant of R350/month towards the end of August. This is in an effort to assist the larger community struggling to make ends meet amidst the chaos of the past two months, and while R350/month is not nearly enough for individuals and families to survive, our government has allocated over R20 billion to this relief mechanism and intends to provide the grant to the public until March 2022. This is clear evidence that, irrespective of the power politics dominating in our government today, the state is doing everything it can to assist during this difficult time. Alas, the inherent unequal and impoverished circumstances of South African society are too tremendous for our government to effect significant change through relief funding.

On the data front, there were a couple of important releases that provide more insight on how the July riots have affected South Africa’s economy. More specifically, ABSA released the Purchase Managers’ Indices (PMI) for July, which fell by a record-breaking 13.9 index points to 43.5, far below the 50-point baseline. This indicates that manufacturing and the production of goods in South Africa have decreased drastically as a result of the recent civil unrest. To make matters worse, IHS Markit PMI has also fallen, which implies that the strong economic start South Africa had at the start of 2021 has been severely damaged by the turmoil in the past two months. This is worrisome as the way forward for our economy is unclear and relies heavily on government intervention.

So, what does this mean for businesses? With a high chance of business and investor confidence significantly decreasing in the coming months, it might seem prudent to take a more conservative business approach and hold off on growing your business in this environment. However, while this is the more attractive choice to many businesses, it is of vital importance to note that we can only grow our economy and effect positive change if we are bold in the face of adversity. If businesses invest in South Africa’s potential and look towards golden growth opportunities here and now, our country has a chance at reversing all that’s happened in the last two months and ending 2021 on a positive trajectory towards growth. It’s incredibly hard to see the state of our economy as anything but on the precipice of destruction, especially with no significant changes being made within government bureaucracy. However, it’s not only the South African government that can transform our society and economy – we can too. The small businesses, the big businesses, the budding entrepreneur with dreams and hopes of a bigger, better, and brighter future – we are all in this together. Nothing about change is easy, but if we each do our part in the grander scheme of things, the country we dream to live in and the country we do live in will become one and the same. Don’t give up hope and keep pushing, and if you find you need a helping hand, please reach out to the COBRA Initiative for business and financial support.

COBRA Crisis Support

The founding and coalition partners at the COBRA Initiative are committed to pooling their collective knowledge, experience, and resources to enable distressed businesses to stand a better chance of surviving the economic crisis that has been exacerbated by the present civil unrest.

COBRA has aligned with professional partners who, together, have not only agreed to provide services on a shared value basis but also, when required, on a ‘Cobra Gifted Value’ basis, subject to the company qualifying in terms of its means. If a business qualifies for Cobra Gifted Value program, professional fees will be reduced or written-off entirely by our partners to ensure a successful outcome for the business in question.

At the COBRA Initiative, we believe each one of us can make a difference but together we can make the change. Please reach out or refer others to the COBRA Initiative for financial, legal, or business rescue support during these unprecedented times.

Visit cobra.org.za to find out more.