Road Construction

How much attention is being given to SA’s precarious macro-economic situation when setting your Capital and Operating budgets?

Topic 8

Is it time to take politics seriously?

  This is where we get down to calling a “Spade a Shovel”. Fake news, media frenzy, corruption, major theft syndicates, huge Government debt and incompetence, Private sector debt crises and, to top it all; land stolen by “Colonels” will be “expropriated-without-compensation” and given to emerging farmers: so where is all this heading?


As a demand-dependent industry, what are Carriers to believe? Whether it's rand millions invested in replacing vehicles or perhaps adding new vehicles to the fleet HCVs are big-ticket items and if their wheels don’t turn they don’t earn. So, forecasting sales or guessing a budget must be causing shareholders serious doubts as whether to expand or simply down-size their investments.

Many SA Carriers say they gave up bidding on local business and now rely on cross-border Shippers to keep the wheels turning but this could be coming to an abrupt end given the Zimbabwean and other neighbouring States situations.


Having said enough on the down side of SA’s dilemma, one must search for some hint of optimism and this, strangely enough, can be found in the NAAMSA HCV sales figures for January. Ok they certainly won’t please the motor industry, but there’s amazing confidence shown in these numbers.

Vehicle manufacturers are being severely challenged by the wobbly rand and inventory challengers but scoring bigtime in financing sales at attractive rates afforded by low offshore interest rates. Of course these loans are partially secured by Full Maintenance Contracts (FMC), where the assets are safeguarded from being cannibalized, however the downside is in high residual values and flooded used vehicle inventory.


Probably the greatest fears, since ‘90 minutes of SONA’, is the turmoil caused by the President’s confirmation that Eskom will be “unbundled” into three separate divisions which drew strong rejection from Unions regarding fears of resulting unemployment. However  whether Eskom is divided into a thousand divisions makes little difference if consumers can’t afford what it produces. Furthermore, any interruption in power supply will surely throw the economy into chaos, which is exactly what opposition parties are aiming for to unseat the ANC led Government.


If one must take any notice of electioneering promises (“free-everything”) then the focus must be on how this is going to be funded when the coffers are empty. The first option must be to increase company tax rates. Whatever funding resources are targeted it will no doubt reflect in inflation as the free-everything concept is a one-sided approach as it creates a negative Value Quotient (function/cost).

The scary issue is when radical political ambitions, aimed at setting minimum wages across the board, must surely increase SA’s huge unemployment figures, such as found in other Southern African economies.


Unfortunately SA is facing an even greater challenge - that of sustaining its Balance of Payments account should political ambitions to Nationalise Mining negatively affect our export earnings.  


Quite apart from domestic woes, our Global trading prospects are also pretty bleak given the deteriorating situation in developed economies, should further weakening of our currency, to stimulate exports and reduce unemployment, could be catastrophic for SA.


The real daunting part is total collapse of our bankrupt SOEs, particularly in the Health and Power sectors. It's even more difficult to imagine Govt. resorting to increasing import tariffs to protect the Manufacturing sector.

Last but not least, is the huge uncertainty about resolving our very probable post-election food security challenges?

Of course there are many other serious concerns than those raised here which will only serve to intensify the dilemma facing the country for at least another three to five years - and this brings us to the critical subject of Financial Risk Management, in other words, the probabilities of these nightmares becoming realities.

Farm Equipment Parts Repair

President Ramaphosa confirmed that agricultural land will be redistributed to emerging farmers

Let’s have your responses to this - the 8th of 10 Topics under discussion this year.

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