‘Industry set for another moribund year’

In an internal report released to FTW, Luke Doig, senior manager, investments and economic services at Credit Guarantee Insurance Corporation of Africa, analysed the latest liquidation data from SA Statistics. “No clearer indication of the extent and impact of the slowdown in economic activity is required than by referring to December 2008’s official liquidation data that leapt 68.4% year-on-year (y-o-y) from 206 in 2007 to 347. “This took 2008’s total 4.7% up to 3 300 compared to 3 151 recorded in 2007.” Despite the normal volatility in these figures, and the fact that December is traditionally a sluggish administrative month, Doig nonetheless felt that this indicated that the business operating environment had deteriorated significantly. Although he noted that personal sequestrations had actually declined marginally in November – by 2.2% to 273 from 279 in November 2007 – he also pointed out that, for the first eleven months of 2008, the total was 51.5% above that for the corresponding period in 2007. “Individuals’ buying power has been under pressure for some time,” he told FTW, “and retail sales figures are ample evidence of this – with real sales down 2.4% for Jan- November 2008. “Final Christmas sales are yet to be released and despite some respite being offered by falling fuel prices for one, this will be reversed in February 2009 when petrol prices may rise by as much as 55cents/ litre. Thankfully diesel prices could enjoy a possible 10c/l reduction and add further pressure to calls for producers, manufacturers and retailers to pass on cost savings.” Looking at the figures on a sectoral basis, Doig saw varied fortunes. Mining experienced a 121% deterioration as falling commodity prices dented earnings and curtailed exploration. Manufacturing, he reckoned, with 31% more closures in 2008, is likely to face ongoing headwinds in the year ahead from sluggish domestic and global demand – while the ongoing infrastructural thrust should provide a buffer to the construction sector as a whole despite plummeting residential activity. Wholesale and retail trade may begin to experience better times by mid-year. But, Doig stressed, the logistics (transport) sector is set for another moribund year after 68% more closures in calendar 2008. The service sectors held up well and should also start to benefit from improved spending power by individuals come the latter half of 2009. “Our experience leads us to expect at least a very difficult start to the year,” said Doig.