THE SA freight and trading industries are under threat, as a series of events hits the country’s industry and commerce, and is likely to throw the brakes on traffic flows of both imports and exports. A primary, direct problem for industry and commerce has been the electricity crisis, which has slowed SA's growth and frightened investors. And it will go on for years, the head of state-owned electricity utility Eskom warned. He suggested that the power shortage was unlikely to be overcome before 2013. This has already had a significant effect. Financial data providers, McGregor BFA, link it to SA’s economic downturn, stating that the country’s economic growth fell to a six-and-half year low in the first quarter – with the power outages leading to sharp contraction in mining output and the manufacturing sector. Gross domestic product (GDP) growth slowed to 2.1% – down from 5.3% in the fourth quarter of 2007. The power shortage has also damaged SA’s reputation as a sound investment destination. Another, and continuing, event is the sharply increasing inflation rate. Following the first double digit inflation number in five years in March, the latest figures from Stats SA show that there was no reprieve on the inflation front in April. CPIX inflation (government’s financial measuring tool) rose by 1.6% month-on-month (m/m) to 10.4% year-on-year (y/y), firmly above the 10.1% y/y reading in March. Producer price inflation (PPI) is also on the up-and-up. Prices at the factory gate surged to 12.4% in April from an upwardly revised 11.9% in March (previously 11.8%). This, in turn, is pushing up the banks’ interest rates – with SA Reserve Bank (SARB) governor, Tito Mboweni, hinting that it may get even worse. The June meeting of the SARB’s monetary policy committee (MPC) might hike the rate by a huge 2%, he suggested to the media. Although this heightens SA’s attractiveness as an investment destination, it has an absolutely contrary effect on the local industrial sector – where capital investment, a large part of it done with borrowed money, becomes less attractive. Rising credit costs have already knocked growth in financial services, which plummeted to 4.9% growth in the first quarter from 8.5% in the fourth quarter of last year. Another limiting factor in the country’s growth –and particularly hitting the freight sector – is the ever-rising price of diesel. It has been triggered by rising international oil prices, with the oil price having surged by 20% since January, while the rand has weakened by around 12% over this period. This has been met with ever-increasing fuel prices, and it’s not finished yet. The retail price of petrol has just increased by 50c a litre, and follows the 55c a litre increase last month. Meantime, 0.05% sulphur content diesel (the fuel that powers most of the country’s trucks) has gone up by 71c, to hit R11.51 a litre in Gauteng and R11.37 at the coast. All in all a challenging outlook from every point of view.
